Carter Worth And Mike Khouw's Johnson & Johnson Trade

On CNBC's Options Action, Carter Worth analysed Johnson & Johnson JNJ from a technical standpoint. Worth explained that the stock is lagging Health Care SPDR (ETF) XLV in 2015 and there has been a strong correlation between the two assets in the last 10 years. Worth presented the daily chart of Johnson & Johnson and showed that the stock has broken out above its downtrend. He has also identified inverse head and shoulders pattern. Worth believes that these bullish factors should move the stock to its all-time high. He added that if the stocks move higher, Johnson & Johnson should return 8 percent and he sees it as a good place to hide if the market declines. Mike Khouw thinks that the best way to make a bullish bet is by using options, because implied volatility is low. He would buy the February 105 call for $1.75. The breakeven for the trade is at $106.75 or approximately 4 percent higher. Dan Nathan commented that he would buy the stock, take the dividend and sell a call option against the long position. He likes the technical setup.