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April 15 2011 / Stock - Johnson and Johnson - Stock Symbol JNJ

Nice Steady Decline


JNJ STOCK - Steady Decline Allows More Put Selling

Johnson and Johnson continues to stay in a narrow trading range. I bought and closed my April 62.50 puts and moved out to October 62.50. It was a bit of a decision whether to accept the shares and garner the dividend and sell an October Covered Call, but the difference between the shares and the naked put was negligible so it was easy to decide to stay with naked puts. As well they offer me a lot more versatility as I can continue to roll them even if the stock stays below the $60.00 share price. On the other hand owning the shares means that if I own the shares and eventually start selling covered calls below my cost basis, I have locked in a loss. I would rather hold deep in the money naked puts and keep rolling them, all the while getting more credit toward my capital and then some day accept shares. 

I have naked puts throughout the year, but none in October, so I picked October for these naked puts. The chart meanwhile shows a pretty steady decline since reaching $65 in November. It will be interesting to see how much more downside JNJ has in it before the value hunters show up and start accumulating the shares.

My 65 puts remained deep in the money, however if by July the stock has made it back to around 62.50, then the July 65 can be closed for a nice profit. The same with the Jan 2012 65s I sold at 9.05. If the stock is above 60 by year end, these will have a nice profit, perhaps as much as $5.00 or 50% for what I sold them at.

JNJ Stock - Oct 2010 to April 2011




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