Stock / Symbol: [private_monthly]Johnson & Johnson / JNJ[/private_monthly]
Trade entry date: Oct 5
Price at trade entry: $62.40
Option Strategy: calendar call spread
Current Position: [private_monthly]
Long 4 JNJ Apr12 62.5 Calls
Short 4 JNJ Oct11 62.5 Calls
at a cost basis of $2.65 per contract
+
[private_monthly]Long 2 JNJ Apr12 60 Calls
at a cost basis of $6.40 per contract
[private_monthly]
Reasoning: With JNJ last closing at $62.53, which is exactly where we need the stock in order to reach the full profit potential on our calendar spread, we're going to close the calendar here. Furthermore, we want to avoid getting exercised on the short calls, should JNJ finish up the day over $62.50.
Later today or early next week, we'll either close out the [private_monthly]Long 2 JNJ Apr12 60 Calls [private_monthly] or write [private_monthly]Nov 65 strike calls[/private_monthly] against them to lower the cost of the position.
Trade Details :
STC 4 JNJ Apr12 62.5 Calls
BTC -4 JNJ Oct11 62.5 Calls
for a net credit of $3.10 per contract (day order, limit order)
Risk Profile for the Calendar Spread:
Max Risk: $1,060
Profit Range: $60.85 – 64.05 (Oct exp)
Max Profit: $292 or 27% @ $62.50 by Oct exp
Profit/Loss upon fill: $180 or 17% (pre-commission)
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