JNJ Analysis

Johnson & Johnson (JNJ)

Update 11/7/2018: I have exited JNJ for a debit of $847 per contract, a loss of $287 per contract, with shares at $144.18 each up $9.32 from entry.

Shares rose by 6.9% over 23 days, or a +110% annual rate. The optoins position produced a 33.9% loss for a -538% annual rate.

I have entered a short iron fly spread on JNJ, using options that trade for the last time 32 days hence, on Nov 16. The premium is a $5.60 credit and the stock at the time of entry was priced at $134.86.

I made the decision to enter the trade in my account to coincides with an earnings announcement on Tuesday, Oct. 16, before the opening bell.

The profit zone for this position is between $140.50 on the upside and $130.80 on the downside.

Implied volatility stands at 24%, which is 1.1 times the VIX, a measure of the volatility of the S&P 500 index. JNJ’s IV rank stands at 65%.

The price used for analysis was $134.80.

Premium: $5.60 Expire OTM
JNJ-iron fly Strike Odds Delta
Long 145.00 89.0% 12
Break-even 140.60 70.0% 32
Short 135.00 51.0% 52
Short 135.00 49.0% 50
Break-even 130.60 67.0% 32
Long 125.00 85.0% 14

The premium is 56% of the width of the position’s wings. 

The risk/reward ratio is 0.8:1, with a maximum potential loss of $440 per contract and maximum potential gain of $560 per contract.

The bid/ask spread was 2.9%.

By Tim Bovee, Portland, Oregon, Oct. 15, 2018


Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.

No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decisions for his or her own account, and take responsibility for the consequences.

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