Mead Johnson Nutrition is hitting new record highs, and one investor is cashing in.
optionMONSTER's Depth Charge tracking system detected the purchase of 3,600 June 60 puts for $0.35 and the sale of an equal number of June 65 calls for $2.30. Volume was more than 8 times open interest in both strikes.
MJN rose 2.66 percent to $66.88 on Friday and has rallied more than 15 percent since mid-March. A lot of those gains occurred Thursday, when the maker of Enfamil baby formula reported better-than-expected earnings and revenue. Management also raised guidance.
Today's option trade was probably the work of a shareholder who thinks that further upside will be limited. He or she collected a credit of $1.95, translating into an exit price of $66.95 on the stock if it's above $65 on expiration.
If MJN falls below $65, the position will only lose money down to $61.95: The puts establish a minimum exit price of $60, but the credit is added atop that level. (See our Education section)
The trade pushed overall option volume in the name to 18 times greater than average so far today. MJN emerged as an independent company in early 2009 when it was spun off from Bristol-Myers Squibb.
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