Barchart Bulls-Eye Options Chief Options Strategist Alan Knuckman was on Bloomberg Thursday to discuss the impact of Goldman Sachs’ downgrade on Johnson & Johnson JNJ and share his option trade on Ford Motor Company F.
Johnson & Johnson A Mover?
Knuckman said Johnson & Johnson is typically not see as much of a mover. “We have seen the volatility increase from about 10 percent, which is ridiculously low to up to 16 percent. So, in percentage terms we have seen it jump; people have used that increase in volatility to sell covered calls against their stock position.”
“So, on Tuesday, 66,000 of the April calls on the $110 strikes were sold. Now, $111 is the target if you average all the analysts’ estimates. So, there is still a lot more upside in that stock then the downgrade that Goldman says.”
Options Trade On Ford
“Ford has been trading between $14 and $18 for the [better part of] the last year. Sixteen dollars is the mid-point. Looking at the in the money call — the $13 call — the low on the year is about $13.26. You can buy that for about $2.25. The breakeven is a quarter higher, with five months for good things to happen. If we get above $16, we’ll go straight to $18,” Knuckman said.
Knuckman believes that the drop in oil prices is a big boost for Ford. According to him, “That makes people feel much better to buy a car and to drive the car and the F-150 just got redesigned and released in December. That’s a big profit point for Ford and a lot of cars are being sold this year.”
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