DGI Adventure 08-02-16 Sold Cash Secured Put – Gilead Sciences, Inc. (GILD) – $79.00 strike – Aug 12 Expiration

This trade was actually executed on Tuesday 07/26/16. I didn’t get a chance to write about it until today.

I completed an investment thesis as recently as January of this year, so this post will not necessarily cover all aspects of the core philosophies article on my investment thesis process.

As mentioned, I completed this trade on Tuesday 07/26, which was the day after GILD reported earnings. Shares were down over 9% at times during the day. 

Obviously some people changed their investment thesis on GILD based on the latest earnings, but I haven’t.

Dividend Cycle

GILD goes ex-dividend on Sept 14, and will continue to pay $0.47/share. GILD is a dividend initiator, having only started paying out last year. I expect two more quarters at this payout, and then probably another increase. Although they just started paying a dividend, they’ve settled into a nice pattern already.

This trade will expire before the next ex-dividend date, and is the equivalent of two quarters worth of dividend payouts.



SPL (Strike Price Logic)

GILD touched $78.25 the monday after Brexit and that’s as low as it’s been since 2014. Momentum is definitely slowing for the company’s flagship drug, Harvoni. I expect once the earnings blackout clears, management will start gobbling up shares if it stays this low.

This strike price represents a sub 8.0 P/E ratio, which is just retarded considering the company has a pretty healthy pipeline and a fortress of a balance sheet if acquisitions are needed.

I’ve already got more invested in GILD than I’d like, but sure, I’ll take more at $79. This would make it a completely full position if assigned. 

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