Gilead Sciences Inc. (GILD)

Update 5/4/2022: I exited my short bull put vertical spread on GILD, 45 days before expiration, for a $1.66 debit per contract/share, a loss before fees of $27 per contract. Shares were trading at $60.17, down $1.22 from the entry level.

The Implied Volatility Rank at exit was 36.8, down eight points from the entry level.

I exited on the third trading day after entry for 44.9% of maximum loss as the position reached failed to become profitable. This is part of a new exit rule system that put into place, explained in my post “Earnings Plays: A Change in Method“.

Shares declined by 2.0% over five days for a -145% annual rate. The options position produced a 16.3% loss for a -1,187% annual rate.

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I have entered a short bull put options spread on GILD, using options that trade for the last time 50 days hence, on June 17. The premium is a $1.39 credit per contract share and the stock at the time of entry was priced at $61.39.

The Implied Volatility Ratio stood at 44.8%.

Premium:	$1.39	Expire OTM
GILD-bull put spread	Strike	Odds	Delta
Puts
Long	55.00	78.0%	18
Break-even	61.39	66.0%	29
Short	60.00	54.0%	40

The premium is 55.6% of the width of the position’s short/long spread. The profit zone covers a no move to the downside and an unlimited move to the upside.

The risk/reward ratio is 2.6:1, with maximum risk of $361 and maximum reward of $139 per contract.

How I chose the trade. The trade was placed to coincide with GILD’s earnings announcement, after the closing bell on the day of entry. In placing the trade I considered the expected move of $1.80 either way, based on options pricing, which gives a price range of $59.59 to $63.19.

By Tim Bovee, Portland, Oregon, April 28, 2022

Disclaimer

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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