GILD Analysis

Gilead Sciences Inc. (GILD)

Update 11/6/2018: I have exited my direction-neutral short iron fly options position on GILD for a profit. The stock has been tracing out a triangle since late October in the middle of its profit zone. What follows the triangle will be a sharp move away from maximum profit, so i decided to take the money and run.

I bought back the short position for a $5.15 debit per contract/share, with shares going for $70.13. The profit on the options was $103 per contract, which amounts to 16.7% of maximum potential profit.

Shares rose by 1.6% over 12 days, or a +44% annual rate. The options position produced a 20.0% return for a +608% annual rate.

I have entered a short iron fly spread on GILD, using options that trade for the last time 57 days hence, on Dec. 21. The premium is a $6.18 credit and the stock at the time of entry was priced at $69.13

I entered the trade just prior to the company’s publishing earnings, today, Oct. 25, after the closing bell.

The profit zone for this position is between $76.18 on the upside and $66.18 on the downside.

Implied volatility stands at 43%, which is 1.9 times the VIX, a measure of the volatility of the S&P 500 index.

GILD’s IV stands higher than 94% of its daily readings over the past year.

The price used for analysis was $69.03.

Premium: $6.18 Expire OTM
GILD-iron fly Strike Odds Delta
Long 80.00 87.8% 15
Break-even 76.18 72.4% 32
Short 70.00 56.9% 49
Short 70.00 43.2% 51
Break-even 66.18 61.5% 34
Long 60.00 79.8% 16

The premium is 61.8% of the width of the position’s wings.

The risk/reward ratio is 0.6:1, with maximum potential loss of $382 per contract and maximum potential gain of $618 per contract.

The bid/ask spread was 3.4%.

By Tim Bovee, Portland, Oregon, Oct. 25, 2018


Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.

No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decisions for his or her own account, and take responsibility for the consequences.

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