MJN – Mead Johnson Nutrition Co. – Shares of the pediatric nutrition company declined as much as 1.75% this afternoon to touch down at an intraday low of $55.70. Despite the decline in shares, one options investor hoping to see Mead Johnson’s shares rebound in the next couple of months initiated a cautiously optimistic transaction on the stock this morning. It looks like the trader enacted a delta neutral hedge, buying 130,000 shares of the underlying stock at an approximate price of $56.30 each, and purchasing a debit put spread. The investor paid a net $0.85 per contract to buy a 10,000-lot November $45/$50 put spread with a 0.13 delta. The parameters of the transaction, specifically the purchase of 130,000 Mead Johnson shares, suggest the investor expects the value of the underlying stock to appreciate. But, the put spread acts as a safety net in case MJN shares continue to slide lower ahead of November expiration.
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Andrew Wilkinson is the senior market analyst at Interactive Brokers Group, where he provides daily commentary and analysis on U.S. equity options trading throughout the trading day. Andrew provides webinars designed to explain option-related trading scenarios covering futures, fixed income, forex and equities.
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