I am recommending we roll our Applied Materials (AMAT) and Target (TGT) positions and sell a call on our uncovered Gilead Sciences (GILD) shares.
AMAT hit the $60 level but then turned lower with the broader market sell-off. I am recommending we roll out one week to generate cash and buy some time for the stock to move higher.
If you are not currently in the AMAT position, please do not enter one at this time. I will alert you when it is time to put new money to work.
We didn’t sell a call on our Gilead Sciences (GILD) shares this week, as I wanted to avoid the company’s earnings report.
Gilead reported adjusted earnings of $2.11 a share on revenue of $6.58 billion. This was well ahead of the consensus estimate of $1.90 a share on sales of $6.3 billion. However, shares sold off on a small reduction in the company’s annual sales forecast.
Sales of COVID-19 treatment remdesivir, which is now known as Veklury, also beat expectations, coming in at $873 million.
Veklury is on track to be a billion-dollar (or more) drug. I believe we will continue to see positive data from ongoing clinical trials. And with the drug priced between $2,340 and $3,120 for a typical five-day treatment course, it pays for itself if it shortens a patient’s hospital stay by just one day.
I am recommending we sell a call on our uncovered shares today.
Target (TGT) continued its decline this week in the face of broader-market weakness. But I am confident in the company. Management is executing well, and the retailer will continue to benefit from the coronavirus pandemic.
Our call is on track to expire worthless, but I am recommending we roll it out one week to generate more cash.
If you are not currently in a GILD and/or TGT position, you can enter one today. Just be sure to buy 100 shares of the underlying stock first to make sure your position is covered. Never sell an uncovered call.
AMAT Oct Week Five (10/30) 62 Put
Current Stock Price: $58.92
- Buy to close the AMAT Oct Week Five (10/30) 62 Put for around $3.08
- Sell to open the AMAT Nov Week One (11/6) 62 Put for around $3.67
- Set your initial credit limit at $0.59, but adjust as needed to roll today
GILD Uncovered Shares
Current Stock Price: $57.68
Current Option Price: $0.57-$0.70
Recommended Limit: Set initial limit order $0.63, but adjust as needed to sell a call today
TGT Oct Week Five (10/30) 160 Call
Current Stock Price: $152.10
- Buy to close the TGT Oct Week Five (10/30) 160 Call for around $0.01
- Sell to open the TGT Nov Week One (11/6) 160 Call for around $1.57
- Set your initial credit limit at $1.56, but adjust as needed to roll today
And here’s where we stand with our other Perpetual Income Portfolio Club position heading into the weekend.
CHWY Nov Week One (11/6) 67.50 Put
Chewy (CHWY) is selling off sharply today along with the broader market. Earlier this week, shares surged on news the company is launching a new telehealth service that will allow pet owners to connect with veterinarians to discuss their pet’s health and get referrals.
We have another week before our put expires and I expect this volatile stock to bounce back.
Current Stock Price: $62.33
Action: No action is needed at this time
Disclosure: I have positions or trade in and out of AMAT, CHWY, GILD and TGT.