New Options for Gilead Sciences Investors Present Potential Gains

Investors in Gilead Sciences Inc (Symbol: GILD) have new options available for the July 18th expiration. The time value of these options is a critical factor that affects the prices option buyers are willing to pay. With 101 days remaining until expiration, these newly listed contracts offer a chance for sellers of puts and calls to secure higher premiums than those available for contracts with shorter timeframes. According to Stock Options Channel’s YieldBoost formula, one put and one call contract have been identified as noteworthy within the new July 18th options chain.

Put Options Analysis: $105 Strike Price

The put contract at the $105.00 strike price currently has a bid of $6.10. Should an investor choose to sell-to-open this put contract, they commit to purchasing GILD shares at $105.00 while simultaneously collecting the premium. This arrangement effectively lowers the cost basis of acquiring shares to $98.90, before broker commissions. For an investor looking to buy shares of GILD, this could be a more attractive option compared to the current trading price of $106.37 per share.

Notably, the $105.00 strike reflects about a 1% discount relative to the current share price, placing it slightly out-of-the-money. Analytical data indicates there is a 57% chance that the put contract will expire worthless. Stock Options Channel will monitor these odds and update them regularly on our website, featuring charts that display these probabilities under the contract detail page. If the contract does expire worthless, the premium would yield a 5.81% return on the cash commitment, translating to an annualized return of 20.99%, which we refer to as the YieldBoost.

Charting Gilead’s Trading History

Below is a chart that showcases Gilead Sciences Inc’s trading history over the past twelve months, with the $105.00 strike highlighted in green:

Call Options Insights: $110 Strike Price

On the calls side, the contract with a $110.00 strike price currently bids at $5.45. If an investor buys GILD shares at the current price of $106.37 and sells-to-open this call contract as a covered call, they obligate themselves to sell the shares at $110.00 while also realizing the premium. In this case, the total return (excluding dividends) could reach 8.54% if the stock is called away at expiration on July 18th. However, if GILD shares rise significantly, potential gains could be capped. Therefore, evaluating both Gilead’s recent trading history and its business fundamentals is essential.

To visualize this, here is Gilead’s trading history, with the $110.00 strike marked in red:

The $110.00 strike represents about a 3% premium over the current share price, placing it out-of-the-money by that percentage. There is also a chance that this covered call contract could expire worthless, allowing the investor to retain both the shares and the premium collected. Current data suggests a 53% probability of this outcome. Stock Options Channel will track these metrics and publish updated analytical charts on our website. If the covered call contract expires worthless, the premium would provide an additional return boost of 5.12%, or 18.52% annualized, also referred to as YieldBoost.

Volatility Overview

The implied volatility for the put contract stands at 35%, while for the call contract, it’s at 36%. In contrast, the actual trailing twelve-month volatility, which considers the last 251 trading days and today’s stock price of $106.37, is calculated to be 24%. For further options contract ideas worth exploring, visit StockOptionsChannel.com.

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The views and opinions expressed herein are the author’s views and do not necessarily reflect those of Nasdaq, Inc.