$JNJ Options Intelligence

🎯 SELL JNJ NOV 21 195/200 CALL SPREAD

I recommend this credit spread because the term structure reveals a critical overpricing opportunity: the 7-day Clean IV of 22.0% sits 8% ABOVE the 13.5% baseline volatility, creating an exceptional premium-selling setup. Combined with JNJ's strong institutional buying momentum (Geode Capital added 1.2M shares, KBC Group bought 578k shares), analyst upgrades from UBS ($214 target) and HSBC ($215 target), and the stock trading only 1.7% above its 20-day MA, this represents a mean-reversion opportunity with elevated IV to exploit.[5][9]

Sell JNJ Nov 21 195/200 Call Spread
Stock Price: $193.09 | Entry: $0.35 credit

📊 Trade Metrics

• Risk: $465 (width of spread minus credit collected)
• Reward: $35 (credit collected)
• Breakeven: $195.35
• Max Loss: $465 if JNJ > $200 at expiry
• Max Profit: $35 if JNJ < $195 at expiry
• Win Rate: 59% (based on delta of short call at 0.408)
• Days to Expiration: 9

📈 Term Structure & Volatility Analysis

• Baseline 90-day Vol: 13.5%
• 7-day Clean IV: 22.0% (8% ABOVE baseline = STRONG SELL signal)
• Market IV: 23.0% (elevated near-term premium)
• 12-day Clean IV: 18.4% (FAIR VALUE)
• Calendar Opportunity: YES - 9% IV differential between 7d and 12d expirations
• Primary Signal: Near-term options severely overpriced; sell Nov 21, consider buying Nov 28 for calendar spread

📈 Greeks & Volatility

• Net Delta: -0.268 (moderately bearish bias)
• Theta: $0.14/day (time decay accelerates into expiry)
• Vega: -$12 (benefits from IV compression)
• Current IV: 23.0% vs Historical: 7.8%
• IV Rank: 100% (EXTREME - maximum premium-selling environment)
• Put/Call Ratio: 0.07 (extremely bullish sentiment, calls heavily bought)

🎯 Why This Trade

The term structure is screaming a sell signal. The 7-day Clean IV at 22.0% sits 8% above the 13.5% baseline—this is the widest overpricing in the term structure. Meanwhile, the 12-day expiration shows only 18.4% Clean IV, creating a perfect calendar arbitrage. JNJ is up 2.9% today on big pharma strength (Merck +4.8%, Amgen +4.6%), but the stock remains only 1.7% above its 20-day MA at $189.82, suggesting limited upside momentum.[5] The 195 strike sits only 1% above current price with 0.408 delta—highly likely to expire worthless. Institutional buying (Geode, KBC) provides underlying support, but analyst upgrades already priced in. RSI at 63.16 shows neutral conditions, not overbought. The 195/200 call spread caps risk while collecting $35 premium with 59% probability of max profit. Expected daily move of ±$2.83 is well below the $5 width of this spread.

📊 Pro Analysis

• Current IV: 23.0% vs Historical: 7.8% (197% elevated)
• IV Rank: 100% (maximum overpricing)
• Expected Daily Move: ±$2.83 (1.47%)
• Put/Call Ratio: 0.07 (calls 14x more active than puts)
• Market Maker Max Pain: $195 (24,944 contracts at this strike)
• Technical: RSI 63.16 (neutral), Price 1.7% above 20MA, above 200MA (bullish structure)
• Unusual Activity: Massive call buying, but concentrated in 195 strike

🔍 Earnings Date Check

Earnings on January 28, 2026 (77 days away). ✅ VALIDATION: Nov 21 expiration is BEFORE earnings (9 days), making this a SHORT-TERM PREMIUM COLLECTION trade, NOT an earnings play. This is appropriate—we're harvesting near-term IV overpricing before the calendar rolls forward.

💡 Trade Management

• Entry: Place limit order at $0.35 credit (bid/ask likely $0.30/$0.40)
• Target: Close at $0.15 (57% profit, close at 50% max profit)
• Stop: Exit if JNJ breaks above $196.50 (threatens short strike)
• Time Stop: Close 3 days before expiry (Nov 18) to avoid gamma risk

📅 Economic Events: CPI tomorrow (Nov 13), NFP Dec 5, Fed Rate Decision Dec 10

⚠️ Options Expiration Validation
• Recommended expiration: Nov 21, 2025 (9 DTE)
• Earnings date: Jan 28, 2026
• Validation: ✅ Expires BEFORE earnings (premium collection trade, not earnings capture)

🔍 Market Overview

Big pharma is in favor today with the Dow up 1.2% to record highs. JNJ's 2.9% gain reflects sector rotation into defensive healthcare as traders await tomorrow's CPI report (key macro event). The VIX is muted at mid-17s, signaling calm expectations. JNJ fundamentals remain strong: $10.43 EPS, 27.3% profit margin, $5.14 annual dividend (2.66% yield) with ex-date Nov 25—just 4 days away, adding support. Technical setup shows price above both 20-day ($189.82) and 200-day ($166.40) MAs, confirming bullish structure. However, the 195 strike sits right at max pain ($195),