Options Corner: Despite Political Woes, Kenvue Can Still Make Tylenol Great Again

Amid a contentious political environment, consumer pharmaceutical firm Kenvue Inc (NYSE:KVUE) finds itself under a harsh spotlight. Specifically, its popular drug Tylenol has attracted the ire of the White House. Late last month, President Donald Trump stated on Truth Social that pregnant women shouldn’t use Tylenol unless absolutely necessary. With Kenvue courting unwanted attention, KVUE stock has suffered badly. Still, there could be an opportunity for contrarian traders.

Fundamentally, this latest controversy isn’t the first rodeo for the brand. True, technically speaking, Kenvue is a young enterprise, which was spun off from pharmaceutical giant Johnson & Johnson (NYSE:JNJ). However, as The New York Times detailed, Tylenol — which goes by the generic name acetaminophen — has previously faced severe crises. At the time, Johnson & Johnson was able to restore public trust.

Unless there’s truly a reason to believe otherwise, Kenvue should be able to right the ship.

Essentially, the concern that the Trump administration has raised is the possible link between Tylenol usage during pregnancy and neurodevelopmental disorders. Certainly, the extraordinary power and influence of the conservative movement has chilled public discourse, which may explain why KVUE stock has fallen 14% in the trailing month. Further, Google’s AI engine Gemini at this moment refuses to broach the subject.

Still, the World Health Organization has emphasized that there is no conclusive evidence linking autism with acetaminophen use during pregnancy. As such, the rational assumption is that over time — irrespective of the political environment — the scientific facts will win out.

Why The Adjustment Of Priors Should Help Lift KVUE Stock

Of course, no one should be under any illusion: the unique political winds cannot be avoided. It’s inevitable, then, that KVUE stock in the current context is a higher-risk, higher-reward opportunity. Still, it’s also important to remember that the equities market is Bayesian in nature; that is, traders are constantly adjusting their prior assumptions — and the reflection of their latest beliefs help dictate where the market may head next.

Even better from an options trading perspective, KVUE stock is experiencing a robust adjustment of priors. Basically, this concept aligns with GARCH (Generalized Autoregressive Conditional Heteroskedasticity) models, which in part state that volatility doesn’t occur linearly but materializes in clusters. In colloquial terms, today is more likely to be a volatile session if yesterday was volatile.

Conceptually, a wave of red ink forces investors to reevaluate the volatile stock’s prospects. At the same time, the negative adjustment risks being overdone — and this could allow speculators to grab a discount. That’s really the argument for KVUE stock.

Specifically, KVUE in the past 10 weeks has printed a 2-8-D sequence: only two up weeks (defined as the return between Monday’s open and Friday’s close), eight down weeks, with an overall downward trajectory. On a rolling basis since its spinoff, this sequence has only materialized eight times. Therefore, no one can make an absolute statistical forecast. However, the median price of outcomes associated with the aforementioned sequence tends to rise sharply.

Interestingly, the period from early December 2024 to early February 2025 saw KVUE stock print a 2-8-D sequence. Over the several weeks, KVUE enjoyed a sizable recovery.

To be clear, history isn’t guaranteed to repeat itself. However, because Kenvue — despite the politics — commands a vast portfolio of important and trusted consumer brands, the overall narrative appears favorable for KVUE stock.

Taking Advantage Of The Skepticism

Amid the adjustment of priors, market makers are decidedly skeptical. They’re effectively pricing in further downside pressure. However, the admittedly limited data suggests that this is the wrong view. Subsequently, contrarians should take a long look at the 16/17 bull call spread expiring Nov. 21.

This transaction involves buying the $16 call and simultaneously selling the $17 call, for a net debit paid of $40 (the most that can be lost in the trade). Should KVUE stock rise through the second-leg strike price ($17) at expiration, the maximum profit is $60, a payout of 150%. Breakeven is at $16.40, which is more than 4% above the current market price.

Ordinarily, betting on such a lift to merely not lose money would be considered extremely aggressive for KVUE stock. Under baseline conditions, KVUE has had a tendency of drifting negatively. However, when the most recent behavioral state is extremely distribution-heavy, traders tend to buy the dip.

It’s not a trade for everybody, and certainly, the Trump administration has levered an uncanny ability to bend perceived reality to his will. Nevertheless, the available data suggests that Kevnue can very much make Tylenol great again.

The opinions and views expressed in this content are those of the individual author and do not necessarily reflect the views of Benzinga. Benzinga is not responsible for the accuracy or reliability of any information provided herein. This content is for informational purposes only and should not be misconstrued as investment advice or a recommendation to buy or sell any security. Readers are asked not to rely on the opinions or information herein, and encouraged to do their own due diligence before making investing decisions.

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