Trade of the Day: Gilead Sciences (GILD)

by Jon Markman | December 31, 2013 9:49 am

Trade of the Day: Gilead Sciences (GILD)

I recently gave you a Trade of the Day featuring call options in Gilead Sciences (GILD[1]), and I want to revisit that today. Smart traders can use the low-volume atmosphere that’s pretty typical around the New Year’s market holiday to establish positions at a significant discount, and using options to play Gilead Sciences stock is a perfect example.

Gilead Sciences stock shares were up 0.8% Monday, and they were reiterated as a “Buy” with a target price of $107 at Bank of America Merrill Lynch. The call was based on strong hepatitis C drug sales of Sovaldi, and the analyst said he believed the drug could have sales of $4.3 billion in 2014. Although the stock is already at all-time highs, there is plenty of opportunity in the fundamentals and sentiment to see the common shares head to the $85-$90 level.

My original recommendation[2] was to buy the GILD Jan. $75 calls at current levels, and I’d like to reiterate that today. Again, it’s important to note that while weekly options are available at this strike price, I think the better trade is the regular monthly calls that expire on Jan. 18. I have a revised target on the GILD calls: Sell half of the GILD calls at the initial target of $3.25, and then hold the remainder of your position for the final target of $4.15.

Jon Markman operates the investment firm Markman Capital Insights[3]. He also offers a daily trading advisory service, Trader’s Advantage[4], and CounterPoint Options[5], a service that helps individual traders make steady, consistent profits with volatility-related instruments.

Follow Jon Markman[6] at Google+.

Endnotes:
  1. GILD: http://studio-5.financialcontent.com/investplace/quote?Symbol=GILD
  2. My original recommendation: http://investorplace.com/2013/12/trade-of-the-day-gilead-sciences-gild-call-options
  3. Markman Capital Insights: http://www.markmancapital.net/
  4. Trader’s Advantage: http://www.jonmarkman.com/
  5. CounterPoint Options: https://order.investorplace.com/index.jsp?sid=SE8121
  6. Jon Markman: https://plus.google.com/109535523304238577573?rel=author

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