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Johnson & Johnson  
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Rolling Put Options Strategy
Squeaker Trade
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The Value Of A Plan
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About The Company
Market Cap 164.8B
Revenue (FYR) $62.5B
EPS (TTM) $4.87
Shares Out. 2.7B
Book Value $20.85
Dividend Yield 3.60%
Div/Share $2.16
P/E 12.3x
Price/Sales (FYR) 2.6
P/Cash Flow (TTM) 10.0x

Johnson & Johnson is a profitable Major Drugs company JNJ is engaged in the research and development, manufacture and sale of a range of products in the healthcare field. Johnson & Johnson has more than 250 operating companies.

The Company operates in three segments. The Consumer segment includes a range of products used in the baby care, skin care, oral care, wound care and women's healthcare fields, as well as nutritional and over-the-counter pharmaceutical products.

The Pharmaceutical segment includes products in the therapeutic areas, such as anti-infective, antipsychotic, cardiovascular, contraceptive, dermatology, gastrointestinal, hematology, immunology, neurology, oncology, pain management, urology and virology.

The Medical Devices and Diagnostics segment includes a range of products distributed to wholesalers, hospitals and retailers. In July 2009, Johnson & Johnson completed the acquisition of Cougar Biotechnology, Inc. with approximately 95.9% interest in Cougar Biotechnology's outstanding common stock. 



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Nothing presented is financial advice, trading advice or recommendations. Everything presented is the author's ideas only. The author accepts no liability for its use including errors and omissions. You alone are solely responsible for your own investing and trading. There are considerable risks involved in implementing any investment strategies and losses can be large. Trade at your own risk.

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The current strategy is selling naked puts near and at the money until I either accept assignment OR get assigned shares. Then I will turn to covered calls. Should the stock fall too low  making covered call selling impractical I will add to my stock position through selling naked puts to lower my overall cost.



Should you find my strategy and ongoing evaluation of this trade of value I hope you will consider a tip for the time I spend detailing out this trade. I have set up a Paypal account for those who would like to donate. Thank you in advance. Remember, nothing on my site is financial advice. They are just my ideas and opinions. Investing is risky and losses can be large. Trade at your own risk. Read the terms of use



YEAR 1: 2009 - Trade Commenced Feb 26 2009
Goal for 2009: 8.5% (10 months)
Strategy: Sell Naked Puts Until Assigned
Capital In Use At End Of 2009 53,500.00
Income Earned in 2009 (10 months) 4276.00
Return On Capital in 2009 (5 months) 7.9%
YEAR 2: 2010
Goal for 2010: 10%
Strategy: Sell Naked Puts Until Assigned
Capital In Use At End Of 2010 81,000.00
Income Earned in 2010 7960.75
Return On Capital For 2010 9.8%


Jan 6 10 64.40 BTC 5 NAKED PUTS APR 55 @ .28     13.25     (153.25) 4122.75
Mar 18 10 64.60 Sold 5 Naked Puts Apr 65 @ 1.20     13.25     586.75 4709.50
Mar 18 10 65.00 BTC 5 NP Apr 60 @ .09     13.25     (58.25) 4651.25
Mar 22 2010: This has been an excellent trade and an excellent chart pattern. JNJ has climbed over a period of a year from around $50.00 to $66.00 a rise of 32%. During the same period my return has been about 15%. Has I been more aggressive and sold at the money or even slightly in the money puts, the return may have been higher. As is the case with many naked put positions or covered call positions during rising markets, the option position will not garner as much as just buying and holding the stock. The problem with buy and hold is that it is based on the investor buying at the bottom and selling at the top. Not many investors will have done that during this time period and how many will have sold prior to this point, fearing that the stock is going to fall back? This is the dilemma with buy and hold - when to buy and when to sell? Meanwhile I have generated about half of the rise in JNJ without ever owning any shares, thereby allowing my capital to be used for additional naked puts or invest in a daily interest account (which I would not do for 1%). With JNJ now back to its midrange between 60 and 70 (see the original chart at the top of this page), JNJ may be on the verge of testing the low 70's. At this stage I will stay around the 65 level for naked puts. Looking at the past years, the stock could easily stay in the range of 60 - 70 for some time. The fall in early 2009 was very dramatic for JNJ and probably unwarranted based on the strength of the company, its earnings, consumer market share, and dividend. Basically it was a bargain back in early 2009, but then so were most stocks. My strategy now will be to sell Naked Puts (unless assigned), and when the value decreases enough, I will buy back the put and roll to the next month. I will not be surprised to find I am at the 65 level for a few months or possibly longer. If I can earn enough income I may even pick up a few shares to write calls against (maybe, but as I love options, unlikely)

Apr 17 10 65.02 Expiry: 5 Naked Puts Apr 65 expired (just barely!)              
Apr 17 10 65.02 Sold 5 Naked Puts May 65 @ 1.25     13.25     611.75 5263.00
Apr 27 10 64.80 BTC 5 Naked Puts May 65 @ .90     13.25     (463.25) 4799.75
Apr 27 10 64.33 STO 5 Naked Puts Jun 65 @ 1.87     13.25     921.75 5721.50
May 28 10 58.40 STO 5 Naked puts Jul 52.50 @ .53     13.25     251.75 5973.25
Jun 8 10 57.90 STO 5 Naked Puts Oct 50.00 @ 1.06     13.25     516.75 6490.00
Jun 18 10 59.18 Expiry" BTC 5 NP JUN 65 @ 5.91     13.25     (2968.25) 3521.75
Jun 18 10 59.18 STO 3 Naked Puts OCT 65 @ 6.60
Comments: See my comments for Jun 18 2010 below.
    10.75     1969.25 5491.00
Jun 18 2010: The past month has not been kind to JNJ. The "flash crash" of May 6 2010 started it all and the stock fell far below the flash crash price. On Jun 1 the stock traded at a low of 57.55 and JNJ has been in the doldrums ever since. What a great opportunity to sell out of the money naked puts. The 200 day moving average was just above 63 when the stock began to turn down. This is a fabulous company and I want to take advantage of this downturn to sell more naked puts. Meanwhile today my June 65 naked puts ended up in the money. Why get assigned when the goal is to keep generating income until I have to finally accept assignment when there is no premium left. Instead there is plenty of premium and I decided to split my 5 naked puts for Jun 65 into 3 for Oct 65 and 2 for Jan 65. Both have very good premiums. This has added an additional 544.75 to my income. If I can roll again next year and generate another 500.00 it will have been very worthwhile. Meanwhile I am holding Oct 50 and Jul 52.50 naked puts. I will also sell some August puts at these levels. I will not be surprised to see this stock recover back to 65. If that occurs I will roll out again if options premiums are decent. Meanwhile though, my share price valuation is down to $51.14 and continues to decline. Every roll of my puts continues to generate income and reduce my share valuation price.

Jun 18 10 59.18 STO 2 Naked Puts Jan 65 @ 7.70     9.50     1530.50 7021.50
Jul 16 10 59.44 Expiry: 5 NP JUL 52.50 expired             7021.50
Jul 16 10 59.44 STO 5 NP AUG 57.50 @ .70     13.25     336.75 7358.25
Jul 23 10 57.10 STO 5 NP SEP 55.00 @ .90     13.25     436.75 7795.00
Aug 20 10 58.57 Expiry: 5 NP Aug 57.50 expired             7795.00
Aug 20 10 58.57 STO 5 NP OCT 55 @ .72     13.25     346.75 8141.75
Sep 16 10 61.15 BTC 5 Naked Puts Oct 50 @ .05     13.25     (38.25) 8103.50
Sep 17 10 61.42 STO 3 NP APRIL 57.50 @ 2.25     10.75     664.25 8767.75
Sep 17 10 61.57 Expiry 5 NP Sep 55 expired             8767.75
Sep 17 10 61.57 BTC 4 Naked Puts Oct 55 @ .10     12.00     (52.00) 8715.75
Sep 17 10 61.57 STO 2 Naked Puts Oct 62.50 @ 1.49
COMMENTS: With the chart below (see Sep 17) JNJ may be on an uptrend. Instead of buying stock I have decided to sell an in the money put. I am already holding Oct 65 naked puts which I plan to roll until I cannot roll further.
    9.50     288.50 9004.25
Sep 17 10 61.57 STO 4 Naked Puts JAN 57.50 @ 1.25     12.00     488.00 9492.25
Sep 17 2010: JNJ is back in an uptrend. How long it will last is difficult to say but all the indicators are that there is still some room on the uptrend although looking at the Bollinger Band, the stock is pulling slightly away from the upper band but right now for me, this is nothing to be concerned about. Imagine if over the next month or two the stock got back up to $65.00. Wouldn't that be nice. I have closed my October 50 and 55 puts to free up some capital for some more aggressive put writing.

Sep 17 10 61.57 Expiry 5 NP Sep 55 expired              
Oct 11 10 63.15 STO 5 NP NOV 60 @ .40 With a delta of -0.09 and low volatility this could be a safe bet for Nov options expiry.     13.25     186.75 9679.00
Oct 11 10 63.23 BTC 3 NP OCT 65 @ 1.83
COMMENTS: This was an excellent trade. I originally sold these puts Jun 18 at 6.60. I have closed them today for 1.83. The profit was 72%. These will be rolled out further in time again.
10.75     (559.75) 9119.25
Oct 11 10 63.23 STO 3 NP APRIL $65.00 @ 4.55
COMMENTS: I have rolled from Oct 65 to April. 7 months out in time. Looking at 65.00 might be quite a stretch for JNJ when compared to the past year. However just like when I sold the Oct 65 put in June, I am not looking for the stock to make it beyond $65. I am looking for the stock to stay within the same range of between 59.00 and 63 or 64.00 which means this put will lose premium as April approaches allowing me to roll yet again. Meanwhile though should JNJ sell off and move back below 60.00 I would consider buying back this put and rolling further out in time again. The who concept here is to keep rolling the put and earn income which eventually can be used to pay for the stock, just as I did with Kraft.
10.75     1354.25 10473.50
Oct 15 10 63.57 Expiry: 2 NP Oct 62.50 expired              
Oct 15 10 63.57 STO 2 NP NOV 62.50 @ .73 1.1   9.50     136.50 10610.00
Oct 19 10 62.70 STO 3 NP DEC 60 @ .79
COMMENTS: With today's weakness I sold 3 NP for DEC 60. If the market sells lower I will sell more puts on JNJ.
1.3   10.75     226.25 10836.25
Nov 10 10 63.90 BTC 2 NP NOV 62.50 @ .18 (0.28)   9.50     (45.50) 10790.75
Nov 10 10 63.90 STO 2 NP JAN 62.50 @ 1.15 1.8   9.50     220.50 11011.25
Dec 17 10 62.54 Expiry 3 NP DEC 60 expired              
DEC 17 2010: With the present uptrend my 3 Naked puts Dec 60 expired. I sold 2 naked puts Jan 2012 $60 strike for a 7.6% return. These 2 long put contracts help to fill in the year and free up some capital for puts next months if, as I expect my Jan 57.50 puts all expire. I am not sure about the other Jan naked puts. I will then take the released capital and spread it out throughout the various months in 2011. I remain very comfortable at $57.50. The Jan 2012 60 puts with a premium of over 4.00 offer enough protection in the event that JNJ falls below 60.00 by year end. I doubt I hold these 2 puts the entire year. If the stock rises and the premium disappears I will buy and close them early. Meanwhile looking at the below chart it is obvious the uptrend has ended for now but the stock is more in a sideways trend, rather than clearly down.

Dec 17 10 62.54 STO 2 NP JAN 2012 60.00 @ 4.60 7.6   9.50     910.50 11921.75
Dec 31 10 61.85 BTC 2 NP JAN $65.00 @ 3.10 4.7   9.50     (629.50) 11292.25
Dec 31 10 61.85 STO 2 NP FEB $65.00 @ 3.55
COMMENTS: This is a roll from Jan to Feb to continue bringing in more premium. I would not roll out further, in case the stock should move higher which would decrease the premium in the Feb put and increase premiums should I roll further out in time.
5.4   9.50     700.50 11992.75
Dec 31 10 61.85 BTC 4 Naked Puts JAN $57.50 @ .08 0.13   12.00     (44.00) 11948.75
Dec 31 10 61.85 STO 4 Naked Puts FEB $60 @ .75 1.25   12.00     288.00 12236.75
END OF 2010 - EARNINGS - $7960.75 =  9.8%



Disclaimer: There are considerable risks involved in all investment strategies. Trade at your own risk.
Stocks, options and investing are risky and can result in considerable losses. None of the strategies, stocks or information discussed or presented are financial advice, trading advice or recommendations. is a private website. Everything presented and discussed are the author's ideas and opinions only.
By using this site, you agree to be bound by its terms of use. The full terms of use can be read here. If you do not agree to the terms of use, do not use this site. The author of assumes no liability for topics and ideas discussed, errors and omissions, ads and their content and external links. Any corporate insignia used are registered trademarks of their respective company or corporation and are being used for identification purposes only. All material copyrighted by Reproduction in whole or in part prohibited. Copyright 2008

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