Unusual Options Activity: Gilead Sciences (GILD)

Shares of biotech firm Gilead Sciences (GILD) have been trending gradually higher over the past few months, with shares now at a 52-week high. One trader see the possibility for further profits in the coming months.

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  • That’s based on the October $80 calls. With 56 days on the clock, over 7,098 contracts traded compared to an open interest of 173, for a 41-fold surge in volume. The buyer of the calls paid about $0.42 to make the trade.

    With shares around $72, they’d need to rise a full 10 percent, or $8, to move in-the-money by expiration. That’s a quick move, even for the biotech firm, but it made a similar move last fall, surging to the $80 range.

    Thanks to the company’s moves over the past year, shares are only up 11 percent, even with double-digit revenue and earnings growth. Shares are also attractively valued at 11 times forward earnings.

    Action to take: Investors may like shares here. Besides the potential for a quick move higher, the company pays a 3.9 percent dividend at today’s levels, and one that’s historically grown over time.

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  • Traders could nab triple-digit gains with the October calls, given their low price. However, they’ll have to be quick to take profits. Traders may want to give the trade more time to play out, going out potentially to January. A longer-dated trade will cost more, and percentage returns may be lower, but the chances of a total wipeout will be reduced.

     

    Disclosure: The author of this article has no position in the company mentioned here, but may make a trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.