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)
Buy the Gilead Sciences (GILD) $67.50 – $70 bull call spread at $2.15 or best
expiration date: 1-17-2014
Portfolio weighting: 10%
Number of Contracts = 47 contracts.
Obamacare is proving to by one of the greatest windfalls in the history of the health care industry. As of January 1, more than 30 million individuals will enjoy government guaranteed payments for health care services. In addition, millions more are signing up for private insurance for the first time.
One of the cleanest shots at this new profit stream is Gilead Sciences (GILD). The ticker symbol seems so appropriate for this new Golden Age for the health care industry.
(GILD) is an American biotechnology company that discovers, develops and commercializes treatments for a range of different diseases. The California based firm initially concentrated on antiviral drugs to treat patients infected with HIV, hepatitis B, or influenza.
In 2006, Gilead acquired two companies that were developing drugs to treat patients with pulmonary diseases. These are all expected to be huge growth areas in the future, and the company has become a favorite of hedge fund traders. This is not a new trade, as both the shares and the sector have been on fire all year.
If you want a lower risk, more diversified play in the area, you can buy the Health Care Select Sector SPDR (XLV). Please note that a basket of stocks is going to deliver half the volatility of single stocks. Therefore, we have to be more aggressive with the positioning to make any money, picking strikes that are closer to the money.
Johnson and Johnson (JJ) is the largest holding in the (XLV), with a 12.8% weighting, while Gilead Sciences (GILD) is the fourth, with a 5.1% share. For a list of the largest components of this ETF, please click here at
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 further out.
Here are the specific trades you need to execute this position:
Buy 47 January, 2014 (GILD) $67.50 calls at????.$7.70
Sell short 47 January, 2014 (GILD) $70 calls a??..?$5.55
Profit: $2.50 – $2.15 = $0.35
($0.35 X 100 X 47) = $1,645 ? 1.65% for the notional $100,000 model portfolio.