We were assigned shares of Applied Materials (AMAT) on Aug. 7 and then sat last week out to avoid earnings risk. This turned out to be the right move as shares shot up on Friday after the company’s results and outlook beat analyst estimates.
I am recommending we sell a slightly out-of-the-money call to bring in income and take advantage of potential further upside.
I am also recommending we sell a call on our Gilead Sciences (GILD) shares. The stock continues to struggle to break above $70, which is where we will sell a call this week.
If you are not currently in an AMAT and/or GILD position, you can enter one today. Just be aware that you will need 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.
We do not currently have an open position on Target (TGT). But as we did with AMAT, I want to avoid the unnecessary risk of the company’s earnings announcement, which is expected before the market open tomorrow. I will recommend selling a put on the stock once the earnings dust settles.
Note that no action is needed on our Chewy (CHWY) Aug Monthly (8/21) 49.50 Call at this time. We may roll the position later this week.
AMAT Uncovered Shares
Current Stock Price: $66.60
Action: Sell to open the AMAT Aug Monthly (8/21) 67 Call (If you are new to the position, you must buy 100 shares of AMAT for every call you plan to sell.)
Current Option Price: $0.49-$0.52
Recommended Limit: Set initial limit order at $0.50
GILD Uncovered Shares
Current Stock Price: $69.30
Action: Sell to open the GILD Aug Monthly (8/21) 70 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: $0.53-$0.55
Recommended Limit: Set initial limit order at $0.54
Disclosure: I have positions or trade in and out of AMAT, CHWY, GILD and TGT.