I am recommending we sell calls on our uncovered shares of Applied Materials (AMAT) and Gilead Sciences (GILD).
AMAT bounced back this week after last week’s sell-off, putting in a potential bottom near $55.
GILD announced the $21 billion purchase of biotech Immunomedics (IMMU). This will deepen its presence in the oncology market, as Immunomedics (IMMU)has a prized breast-cancer drug. As an all-cash deal, it will not be dilutive to shareholders, and the stock moved higher on the news.
We will sell slightly out-of-the-money calls on each.
If you are not currently in an AMAT and/or GILD position, you can enter one now. 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.
Note that no action is needed on our Chewy (CHWY) Sep Monthly (9/18) 52.50 Call or Target (TGT) Sep Week Four (9/25) 152.50 Put at this time.
AMAT Uncovered Shares
Current Stock Price: $57.15
Action: Sell to open the AMAT Sep Week Four (9/25) 57.50 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: $1.27-$1.36
Recommended Limit: Set initial limit order at $1.31
GILD Uncovered Shares
Current Stock Price: $66.68
Action: Sell to open the GILD Sep Monthly (9/18) 67 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: $0.54-$0.59
Recommended Limit: Set initial limit order at $0.56
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