Editor’s note: Friday’s PIPC Update mistakenly said that we would be holding a Live Trading Session today. We apologize for any confusion this caused.
We do not yet have a date for the next live session but do plan to hold one soon, possibly as early as next week. We will send you an invitation to the session as soon as the date has been confirmed.
Our Applied Materials (AMAT) put expired worthless on Friday, so I am recommending a new one. The stock is up today following Friday’s sell-off on the heels of Intel’s (INTC) earnings report. I see $60 as a new support level, and that is where we will sell a put.
Our Chewy (CHWY) and Gilead Sciences (GILD) calls also expired worthless last week.
While CHWY is trading more than 10% below its all-time high, the stock appears to have found solid support above $45. However, $50 is acting as a strong ceiling, so we will sell a call just below that level.
On a personal note, I made a discovery about Chewy’s business with regard to its relationships with some veterinarians. My 16-year-old cockapoo paid a visit to a cardiologist (can you imagine?) and the vet automatically sent his prescription to Chewy to be filled and then sent directly to my home. I assume other vets are doing the same and that this trend will introduce even more pet owners to Chewy.
Gilead Sciences is expected to announce earnings on Thursday. While we sit the week of earnings out with certain stocks, I am recommending we sell a new call on GILD this week.
I believe the company’s earnings will be in line with analyst estimates and essentially a non-event. The stock is much more likely to trade on trial results for coronavirus treatment remdesivir, and Wall Street’s forecast for how the drug will impact Gilead’s bottom line, as well as on news about possible vaccines or treatments from other companies.
Overall, I see GILD as wildly undervalued and do not want to miss out on the premium we can collect. We will go out two weeks to allow for some flexibility in managing the position.
If you are not currently in a CHWY and/or GILD position, you can enter them today, just be sure to buy 100 shares of the stock first for every call you plan to sell to make sure your position is covered. Never sell an uncovered call.
Finally, we are selling a new put on Target (TGT) after our shares were called away last week. The stock has held above $120 for a few days, and we should view this as short-term support. I am recommending we sell a put just above this level.
Current Stock Price: $62.36
Action: Sell to open the AMAT Jul Week Five (7/31) 60 Put
Current Option Price: $0.42-$0.46
Recommended Limit: Set initial limit order at $0.44
CHWY Uncovered Shares
Current Stock Price: $46.68
Action: Sell to open the CHWY Jul Week Five (7/31) 49 Call (If you are new to the position, you must buy 100 shares of CHWY for every call you plan to sell.)
Current Option Price: $0.41-$0.45
Recommended Limit: Set initial limit order at $0.43
GILD Uncovered Shares
Current Stock Price: $74.10
Action: Sell to open the GILD Aug Week One (8/7) 80 Call (If you are new to the position, you must buy 100 shares of GILD for every call you plan to sell.)
Current Option Price: $0.33-$0.35
Recommended Limit: Set initial limit order at $0.34
Current Stock Price: $123.03
Action: Sell to open the TGT Jul Week Five (7/31) 121 Put
Current Option Price: $0.72-$0.77
Recommended Limit: Set initial limit order at $0.74
Note: Option prices tend to move around more than stock prices, so the prices you see when you receive this alert may be different than what I am seeing now. The most frequent concern I hear from members is “missing the trade” — i.e., not getting the limit price I recommend within a few minutes of placing the order.
It is important to be patient with these trades. Begin with my recommended limit for each trade, and if you need to adjust it slightly in a few hours to get in, you can do so.
The Perpetual Income Engine strategy involves selling options every week, so while a few pennies can be important to your short-term return, getting the trade executed is more important over the long run. Use your judgment as to when to adjust the trade after you place your initial order, but give it some time before doing so.
Disclosure: I have positions or trade in and out of AMAT, CHWY, GILD and TGT.