Trade Alert - (GILD) October 20, 2014

As a potentially profitable opportunity presents itself, John will send you an alert with specific trade information as to what should be bought, when to buy it, and at what price.

Trade Alert - (GILD)

Sell the Gilead Sciences (GILD) November, 2014 $80-$85 deep in-the-money vertical bull call spread at $4.60 or best

Closing Trade

10-20-2014

expiration date: November 21, 2014

Portfolio weighting: 10%

Number of Contracts = 27 contracts

 

I?m sorry, but a 26% profit in two days is good enough for me. That is the gain since we picked up this spread at the absolute bottom of the market on Thursday.

We have already reaped 80% of the potential profit in this position. Why bother to run it into expiration just to capture the remaining 20%. Adding $2.57% to the total value of your portfolio in just two days is nothing to sneeze at.

It helps that I managed to capture a near 10% move in the stock. Apparently, the rest of Wall Street agrees with my research. Part of this instant profit also comes from the collapse in market volatility (VIX) from 30% to 20%.

So I am going to take profits here on the Gilead Sciences (GILD) November, 2014 $80-$85 deep in-the-money vertical bull call spread at $4.60 or best.

Better to have some cash to hedge our remaining aggressive long positions, or take advantage of the next market dive on the long side.

You can sell this spread anywhere in a $4.50-$4.75 range and have a fantastic instant profit.

Option prices are all over the map these days, so this is just an educated guess as to where the spread might be trading. To zero in on more accurate prices, I am now checking them on two different platforms before I send Trade Alerts out.

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.
Keep in mind that these are ballpark prices only. Spread pricing can be very volatile on expiration months farther out.

Here are the specific trades you need to execute this position:

Sell 27 November, 2014 (GILD) $80 calls at?????$21.85

Buy to cover short 27 November, 2014 (GILD) $85 calls at.?.$17.25
Net Proceeds:??????????????????.....$4.60

Profit: $4.60 - $3.65 = $0.95

(27 X 100 X $0.95) = $2,565 or 2.57% profit for the notional $100,000 portfolio.