Trade Alert – (GILD) – BUY
BUY the Gilead Sciences (GILD) July, 2017 $62-$65 in-the-money vertical bull call spread at $2.57 or best
expiration date: July 21, 2017
Portfolio weighting: 10%
Number of Contracts = 39 contracts
It is clear now that biotech is the new FANG and is about to deliver FANG like results.
The market has been begging for a major rotation, and this is it. It is just what traders and investors were begging for in an otherwise dreadfully slow summer market.
I am therefore picking up the Gilead Sciences (GILD) July, 2017 $62-$65 in-the-money vertical bull call spread at $2.57 or best.
As long as the shares stay above $65 by the July 21 expiration day in 21 trading days we should clock a handy 16.73% profit on the position.
Gilead Sciences is the world’s preeminent maker of anti hepatitis drugs and is one of my long-term favorites.
It is also enticing that the (GILD) charts have just forged a major long-term bottom.
If you can’t do options then buy the IShares NASDAQ Biotechnology ETF (IBB), which is on fire, and should rise to $400 shortly.
This is a stock that could double by the end of 2018. Buy a great performing stock in the top-performing sector on a major breakout.
The company has reported good results for sales of its blockbuster Hepatitis C drugs, Sovaldi and Harvini.
I am giving a nod to the current high risk, low volatility environment and being very cautious here by going with strike prices for the options that are well below the 200-day moving average.
A short 21 trading day expiration gives us some extra protection.
This position should be able to weather some pretty fierce storms.
I spoke to a friend of mine who works for a health care venture capital firm, and I thought I’d pass through a few tidbits.
Gilead Sciences (GILD) is basking in the glow of the most profitable drug launch in history.
The drug is so revolutionary, that it is on the scale of medical miracles of decades past, such as Salk vaccine immunizations for polio and penicillin treatments for bacterial infections.
So far, Gilead has cured a breathtaking 90% of patients.
Now the company is using various drug combinations that produce even higher success rates with fewer side effects, and may be expanded to treat other life threatening diseases.
A big controversy has been its immense cost, which works out to $84,000-$135,000 per patient. This has become a bigger issue with the advent of Obamacare, now that the government is picking up much of the tab.
But, that’s a bargain compared to full treatment of the disease, which can run as high as $350,000 per patient. That is, unless you don’t care if you die.
Partly in response to these complaints, the company is making the drug available at deep discounts in 91 emerging nations that account for 50% of all Hepatitis C cases globally. What it loses on margins there it will make back in volume.
With any luck, we may see hepatitis C wiped out in my lifetime, as I have already seen with smallpox (I saw some of the last few live cases in kids in Nepal in 1976).
All of this makes the stock appear a bargain at its current $67.15 price. At a multiple of a subterranean 7.11X earnings, the stock should hit $130 next year.
You all know that health care is one of my three core industries to bet on for the long term (the others are energy and technology).
The short-term driver of the share price for (GILD) is obviously whether the health care sector is in, or out of vogue. But for the long term Gilead looks like a good bet to me.
And I don’t even have hepatitis.
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Please keep in mind that these are ballpark prices only. There is no telling how much the market can move by the time you get this.
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The best execution can be had by placing your bid for the entire spread in the middle market and waiting for the market to come to you.
The difference between the bid and the offer on these deep in-the-money spread trades can be enormous.
Don’t execute the legs individually or you will end up losing much of your profit. Spread pricing can be very volatile with only 13 days to expiration.
If you don’t get done, don’t worry. There are another 250 Trade Alerts coming at you over the coming 12 months.
Here are the specific trades you need to execute this position:
Buy 39 July, 2017 (GILD) $62 calls at……………………$5.40
Sell short 39 July, 2017 (GILD) $65 calls at…………………………$2.83
Potential Profit: $3.00 – $2.57 = $0.43
(39 X 100 X $0.43) = $1,677 or 16.73% profit in 21 trading days.