DailyPlay – Opening Trade (JNJ) – January 26, 2023

JNJ Bullish Opening Trades

View JNJ Trade

Strategy Details

Strategy: Short Put Vertical Spread

Direction: Bullish

Details: Sell to Open 6 Contracts March 17th $170/$165 Put Vertical Spreads @ $1.86 Credit per contract.

Total Risk: This trade has a max risk of $1,884 (6 Contracts x $314).

Counter Trend Signal: This is a Bullish trade on a stock that is experiencing a bearish trend.

1M/6M Trends: Bearish/Bearish

Technical Score: 3/10

OptionsPlay Score: 92

Entering the Trade

Use the following details to enter the trade on your trading platform. Please note that whenever there is a multi-leg option strategy, it should be entered as a single trade. 

Investment Rationale

Stocks started off well lower on Wednesday from MSFT and TXN forward guidance concerns. They slowly climbed back to near breakeven by 3pm, and ended up closing mixed with negligible gains and losses. Sector leadership came from Financials and Consumer Discretionary while Utilities and Industrials were the biggest losers.

Now that earnings are out, the weekly chart of JNJ looks interesting on the long side. It has held key support (highlighted) at $167, and it was accompanied by a Setup -9, too. As such, let’s look to short the $JNJ Mar. 17th $170/$165 put spread. (Yesterday, this went out at $1.85 mid, and it represents a credit of 37% of the strike differential, and it is the only option strike combo using the ATM one that is close to being fairly priced. (Calls are silly expensive and puts are relatively cheap to sell.) Alternatively, if you are so inclined, you could consider buying the stock outright (given the very clear support level still holding.

JNJ – Daily