JNJ Stock has been a favorite for years. While a lot of investors feel that JNJ Stock is dull, it is one of the reasons I like JNJ Stock! But if you read my article from Oct 11 2011 on Learn From The Bear, you might think twice about JNJ Stock being dull. It has had some pretty rough patches over the past years and some terrific profit making periods during recoveries.
On January 9 2012 JNJ Stock pulled back pushing put premiums higher. While lately with Volatility declining throughout the markets JNJ Stock option premiums have declined, I can still receive decent put premiums by going out slightly over a month. While many investors prefer to sell puts at the money, if you look at the chart below you can see that historically the prime put selling location since August was $62.50. This allowed for put selling with good protection and if assigned shares, a number of opportunities to either sell covered calls to be exercised out of JNJ Stock or to sell the shares directly whenever it rose above $62.50.
JNJ STOCK CHART FOR 2011
JNJ Stock for my Jan 9 2012 put selling trade shows that $62.50 is a prime put selling strike.
The above JNJ Stock chart clearly shows where JNJ Stock became over-valued last Spring and early Summer. In July JNJ Stock easily followed the market lower stopping at $59.08 in August before recovering into the fall of 2011. This year I am hoping JNJ Stock will stay within a tight trading range however with big money busy buying these large cap dividend payers like JNJ Stock, I will not be surprised to see the stock move and stay above $65.00. At $65.00 I feel JNJ Stock is over-valued. My top end is $62.50 when it comes to selling puts. Johnson and Johnson would have to see strong earnings growth to set a fair value trading range of $65 to $72.50. I personally doubt the stock can sustain prices above $67.50 for any lengthy period of time, however stocks often surprise to the upside. That does not mean I need to chase it higher though.
My JNJ Stock put selling trades for 2011 ended up earning just $4893.50 which was slightly better than 2009 (JNJ Stock 2009 trades) but a far cry from the $7960.75 I earned in my JNJ Stock 2010 put trades. All together though I had earned $17130.25 which will pay for about half my 5 put contracts at $62.50 if I was assigned shares.
Therefore if assigned shares on JNJ Stock in 2012 my cost basis is going to be a lot lower than whatever strike I sell shares at. This therefore allows me to sell much closer to the money. Today I sold JNJ Stock $62.50 puts, 5 contracts at $.62 cents. I realize it is 1% for 6 weeks but I am hoping for some opportunities this year to possibly do some swing trades with JNJ shares as well as earn more with my put trades by staying closer to the money strikes when selling puts.
I have marked on the chart above the two low points for the years. Both were great buys and with the extra capital I have available I will be watching for opportunities to step in when the stock falls lower. If JNJ stock gets down to below $60.00 I will sell puts at $62.50 as well as $60.00 so in effect they will be in the money and should earn better premiums.
I believe in 2012 JNJ Stock should stay within a tight range allowing me to successfully sell puts for the fourth year only this year I will endeavor to earn more from the ability to be more aggressive by staying closer to the money with my strikes and when JNJ Stock falls, sell puts in the money.
REVIEW JNJ Stock Trade Years
JNJ Stock 2012 Trades
Select this JNJ Stock link to view Johnson and Johnson Investors Relations