Options Are Moving in This Forgotten Space

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Biotechnology’s quietly coming to life, and options traders are flocking to one of the biggest names in the space.

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Call volume is spiking in Gilead Sciences (GILD) as the developer of antiviral drugs pushes the top of its recent range. Here’s a breakdown of the main activity:

  • About 10,000 October 82.50 calls traded for $0.21. Volume was below open interest, which suggests an existing position was closed.
  • A matching number of November 82.50 calls changed hands for $1.26. Volume was above open interest.

It’s not clear which contract was bought and which was sold. But either way, it looks like the investor was adjusting a bullish position.

On the one hand, it’s possible he or she previously owned the October calls and exited them to roll out one month into the future. In that case, they paid an incremental $1.05 in order to gain more time with exposure to a rally — including the release of third-quarter earnings.

On the other hand, the trader might own GILD equity and be using the options as part of a covered call strategy. If that’s the case, they would have collected a net $1.05 buying back the Octobers and selling the Novembers.

Regardless of which transaction was at play, the investor seems to want exposure to roughly 1 million GILD shares. See our Knowledge Center for more on how options can help you manage risk and earn income.

Gilead Sciences (GILD)
Gilead Sciences (GILD) chart with range and moving averages.

GILD rose 0.80 percent to $77.83 in early-afternoon trading, and has been trapped in a narrow range recently. It’s climbed in the last three weeks on optimism toward filgotinib, a partner’s arthritis drug.

Total option volume in GILD is more than twice the daily average so far in the session, with calls outnumbering puts by a bullish 8-to-1 ratio.

By the way, did you see the bullish put selling in General Electric (GE) on Friday? That trader is making money today!

Disclosure: This post is for educational purposes only and shouldn’t be considered a trade recommendation. Trading options may not be suitable for all investors.

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David Russell is VP of Content Strategy at TradeStation. Drawing on nearly two decades of experience as a financial journalist and analyst, his background includes equities, emerging markets, fixed-income and derivatives. He previously worked at Bloomberg News, CNBC and E*TRADE Financial. Russell systematically reviews countless global financial headlines and indicators in search of broad tradable trends that present opportunities repeatedly over time. Customers can expect him to keep them appraised of sector leadership, relative strength and the big stories – especially those overlooked by other commentators. He’s also a big fan of generating leverage with options to limit capital at risk.