Our Applied Materials (AMAT) and Target (TGT) puts and Gilead Sciences (GILD) call expired worthless on Friday. We are selling new options on these positions today.
AMAT continues to run higher and could get a boost from a positive announcement by Taiwan Semiconductor Manufacturing (TSM), which is expected to report earnings this week.
GILD is stuck in a tight trading range of $62.50-$65. It may remain so until the company reports earnings later this month or trial results related to its coronavirus treatment remdesivir. Luckily for us, the option chains still throw off a good deal of cash.
If you do not currently have a GILD position, remember 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.
TGT’s designation as an essential retailer is likely to be a boon for the company and stock as rising coronavirus cases in many parts of the country could lead to further lockdowns.
Target has thrived during the pandemic and is adapting to the new consumer reality. Case in point: This week, the retailer is holding its “Deal Days” event to compete with Amazon (AMZN)’s annual Prime Day sale, and it will be offering Black Friday pricing throughout November.
Note that no action is needed on our Chewy (CHWY) Oct Monthly (10/16) 55 Call at this time
Current Stock Price: $64.32
Action: Sell to open the AMAT Oct Monthly (10/16) 63 Put
Current Option Price: $0.42-$0.45
Recommended Limit: Set initial limit order at $0.43
GILD Uncovered Shares
Current Stock Price: $64.60
Action: Sell to open the GILD Oct Monthly (10/16) 64.50 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: $0.57-$0.60
Recommended Limit: Set initial limit order at $0.58
Current Stock Price: $164.81
Action: Sell to open the TGT Oct Monthly (10/16) 165 Put
Current Option Price: $1.65-$1.71
Recommended Limit: Set initial limit order at $1.74
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.