A downside position led yesterday's option activity in Johnson & Johnson even as its shares hit a three-year high.
A trader bought 5,000 August 60 puts for the ask price of $0.04, according to optionMONSTER's Depth Charge system. The volume was more than open interest, so this is a new position.
The delta of the options, however, is just 0.01. This means that if JNJ drops $1, the options will only gain $0.01 (at least for that first $1). It also means that there is a probability of only 1 percent that those puts will be in the money at expiration.
The put buying may be an outright bearish play or a hedge against a long position. In either case, the trade would profit only if the stock drops sharply in coming weeks.
JNJ finished the day down 0.38 percent at $67.78 after climbing to $68.15 earlier in the session, its highest level since October 2008. Shares of the health-care products giant bounced off support and 2012 lows around $62 a month ago.
More From optionMONSTER
Apple's ability to shelter billions of dollars of income from tax has depended on an unusual loophole in the Irish …