Options Trade – Gilead Sciences (GILD)

I always like to make trades when a good company experiences short term bad news.  Case in point:

• TheStreet – Gilead (GILD) Stock Plunges as Maxim Downgrades on Weak Q1 Earnings

Earlier Today, I sold 7 May 2016 Put Contracts (87.5 Strike) for Gilead Sciences (GILD) – to open a trade.  These options expire on May 20, 2016 – before Gilead goes ex-dividend on June 12, 2016.

*Premium Collected: $1,435.00

Here is my strategy breakdown on Gilead:

• Sold the puts with a large Margin of Safety built in – with the $1,435.00 premium collected, my effective Margin of Safety is over 31%.
• If I get put the Gilead shares – I will collect a Dividend in early June 2016 – $301.00.
• I will immediately sell longer term Call Options to lower my Margin of Safety even more – estimate another $1,500.00 in premium.

I am making this trade because I need more exposure to both Equity and Healthcare – hopefully I will be put the shares since this is a great long term holding.

*Excludes transaction costs.