The Best Blue Chip to Own in October

JNJ sports cheap options to boot

Deputy Editor
Oct 6, 2020 at 1:45 PM
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We're officially into the first full week of October, and while we've already touched on one of the best stocks to own this month, there's an interesting case to be made for the only blue chip to make the list. More specifically, Johnson & Johnson (NYSE:JNJ) found its way onto a list compiled by Schaeffer's Senior Quantitative Analyst Rocky White, of the best 25 S&P 500 (SPX) stocks to own in October over the past 10 years. Below, we'll take a look at JNJ's recent activity, and make a case for why it may be a prudent play for options traders.

Best of October

More specifically, looking back over the last decade, Johnson & Johnson stock boasts an average return of 3.2% in  October, with nine out of 10 returns positive. Maybe more intriguing, not only was JNJ the only blue chip to make the list, it was the only pharmaceutical and biotechnology stock as well.

Today, JNJ was last seen trading at $147.97, while it's sector is one that's seen a lot of tumultuous activity as the uncertainty surrounding the pandemic rages on. As a result JNJ has traded up and down over the last couple months. Still, the equity boasts a year-over-year gain of 10.9%,and looks set to close with support in place from its 20-day moving average for the second day in a row.

JNJ Chart October 6

Meanwhile, the options pits have been quite bullish, per the security's 50-day call/put volume ratio of 3.49 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). This ratio sits in the elevated 84th percentile of its annual range, suggesting a bigger-than-usual appetite for long calls of late. 

The good news for options traders is that near-term JNJ options can be had for a bargain at the moment. The security's Schaeffer's Volatility Index (SVI) stands up at 24% -- in the 19th percentile of its annual range. This indicates that now is an attractive time to jump aboard the equity with options.


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