Trade Alert - (GILD) February 5, 2015
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
Buy the Gilead Sciences (GILD) February, 2015 $87.50 - $92.50 deep in-the-money vertical bull call spread at $4.40 or best
Opening Trade
2-4-2015
expiration date: February 20, 2015
Portfolio weighting: 10%
Number of Contracts =23 contracts
This is a stock that could double by the end of 2015.
Buy a great performing stock in the best performing sector on a 10% dip. The stock has over reacted to an earnings report that was fantastic; but carried conservative forward guidance, based on expected future pricing pressure on its blockbuster Hepatitis C drugs, Sovaldi and Harvini.
You can buy the Gilead Sciences (GILD) February, 2014 $87.50-$92.50 deep in-the-money vertical bull call spread all the way up to $4.60 and still clock a nice two week profit for the February 20 expiration.
I am giving a nod to the current high risk, high volatility environment and being very cautious here buy going with strike prices for the options that are well below the 200-day moving average. A very short, 11 trading day expiration gives us some extra protection.
This position should be able to weather some pretty fierce storms.
If you want to be more aggressive and take a longer view, buy the (GILD) April, 2015 $110 calls at $2.20 or better. If we break to a new all time high by the April 17 expiration, as I expect, you could score a 3-5 bagger for these options.
If you don?t do options, just buy the shares and sit on them for the rest of the year.
More in depth research to follow shortly.
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:
Buy 23 X February, 2015 (GILD) $87.50 calls at?????$11.90
Sell short 23 X February, 2015 (GILD) $92.50 calls at..??.$7.50
Net Cost:??????????????????.....$4.40
Potential Profit at expiration: $5.00 - $4.40 = $0.60
(23 X 100 X $0.62) = $1,380 or 1.38% profit for the notional $100,000 portfolio.
