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OIB Trade Alert: CVS, GILD, TWTR

The market has been choppy lately with a downward bias due to concerns about interest rates and the spillover of those concerns from bond to equity markets. Fed Chair Jerome Powell is expected to reassure markets of the central bank’s commitment to its bond-buying program during his appearance at a Wall Street Journal webinar today.

The market does not appear to be pricing in a dramatic move from this announcement, so I want to get a jump on managing our positions that expire this week.

I am recommending we roll our CVS Health (CVS), Gilead Sciences (GILD) and Twitter (TWTR) calls.

CVS Mar Week One (3/5) 72 Call

Current Stock Price: $69.69

Cost Basis: $69.18

Action:

  • Buy to close the CVS Mar Week One (3/5) 72 Call for around $0.05
  • Sell to open the CVS Mar Week Two (3/12) 70 Call for around $1.03
  • Set your initial credit limit at $0.98, but adjust as needed to roll today

New Cost Basis: $68.20

Expiration: After the close on Friday, March 12

Potential Rate of Return: 2.6% in 18 days, or 52% annualized, if shares are called away

GILD Mar Week One (3/5) 65 Call

Current Stock Price: $63.82

Cost Basis: $65.53

Action:

  • Buy to close the GILD Mar Week One (3/5) 65 Call for around $0.17
  • Sell to open the GILD Mar Week Two (3/12) 64 Call for around $0.95
  • Set your initial credit limit at $0.78, but adjust as needed to roll today

New Cost Basis: $64.75

Expiration: After the close on Friday, March 12

Potential Rate of Return: I am targeting breakeven for this position

TWTR Mar Week One (3/5) 76 Call

Current Stock Price: $69.43

Cost Basis: $71.17

Action:

  • Buy to close the TWTR Mar Week One (3/5) 76 Call for around $0.09
  • Sell to open the TWTR Mar Week Two (3/12) 71 Call for around $1.69
  • Set your initial credit limit at $1.60, but adjust as needed to roll today

New Cost Basis: $69.57

Expiration: After the close on Friday, March 12

Potential Rate of Return: 1.9% in 25 days, or 28% annualized, if shares are called away

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