JNJ: Oops I did it again...18th Consecutive Week Up

I am short and it is not working. But while I am a little frustrated, I am at the same time amazed with this run to the upside. The new high for the week was put in just shy of $86 at $85.99. May 1st was a day of hope for the bears where JNJ traded a buck lower, we all thought it was day 1 of decent trade lower (but it was just a head fake). I continue to be long the May '13 $85 puts and it now seems like we are going for a hail mary on this one given its resilience to the upside (probabilities say it only has a 17% chance of hitting $82.50). But then again, what do the probabilities say about this thing finishing higher for a 19th consecutive week in a row?

But after getting short this name starting on 4/8 at the time when it was only up 14 consecutive weeks in a row, I am committed to the trade. Eventually this thing will crack. I would love to see some profit taking in this name for a move $5 lower, that would be ideal :)

Other than hoping for that down move between now and May expiration I continue to sell some premium against my long puts with the weekly's to try to mitigate the time decay as much as possible.

Good Luck Trading!

In The Money Trades

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Price Direction: A 50/50 Probability?

If you buy into the idea of probabilities and statistics and the fact that direction is a 50/50 probability. Then you would also agree that with enough occurrences that the up days vs down days should be about 50/50 (same concept for weeks or any other time frame). In the quick analysis I put together below it is evident that direction on any given day or week follows a normal distribution and JNJ’s current price run to the upside is an outlier way out on the right tail of the distribution curve with 17 consecutive up weeks.

Analysis Based On Weekly Closes (10 year data set)

Just on up weeks vs down weeks alone we are looking at a 5-6 standard deviation move which only happens 1/100 times. This coupled with the fact that price to the upside has also made similar moves away from the mean is what makes this trade so attractive. It’s just a numbers game.

Good Luck Trading!

In The Money Trades


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JNJ Finishes Up 17th Consecutive Week

I really don't have to say much here, as many of you that have been following the blog know I am short JNJ with conviction. We made another new high this week and closed up for the 17th straight week in a row. Call me crazy but I am sticking with my bet that this thing is going to have a down week. And I honestly feel that the higher this thing goes the harder it is going to fall. My first target is $80/share and as low as $76/share.

I had previously mentioned that I was going to roll my $85 puts out a month if I did not get the move lower I was looking for, but after watching the price action the last few days of this week. I decided to keep the May puts in place with 21 days to go until expiration.

We will see what happens next week.

Good Luck Trading!

In The Money Trades

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Who buys at all time highs???

As I write this post this morning the markets are back within arms length to ALL TIME HIGHS! I really don't know how you can buy all time highs. If history tells us anything, buying all time highs whether in the stock market or in the housing market or any other market for that matter is a losing trade. But we have to remember that the markets can stay irrational for longer than expected. If you don't get too big for your pants, you can weather the storm.

In continue to be a difficult environment to sell option premium given the super low volatility environment. 

Positions: Short /ES, Short JNJ, Short GME, Long CLF, Long NLY,

Markets at all time highs are not great on my portfolio but I do have 2 pieces of saving grace:

1) I have positive theta

2) I am long CLF and that is offsetting negative P&L as we move higher.

Good Luck Trading!

In The Money Trades

And 1 favor that we ask: 

If you like the hard work we put into our blog posts and videos, PLEASE help us out by sharing them. Click the share links below and share them on FB, twitter, etc. It really helps us get more exposure and grow IN THE MONEY TRADES!