DGI Adventure 10-1-16 Sold Cash Secured Put – Gilead Sciences, Inc (GILD) – $74.50 strike – Oct 28 Expiration

This trade was actually executed on Tuesday 09/27/16. I didn’t get a chance to write about it until today.

I walked through all of the core philosophies elements of  my investment thesis process way back in January.

Additional discussions can be found in the posts from August when I sold puts in GILD.

This is really just a continuation of those positions, but with a lower strike price this time around.

I have updated the portfolio and income tracker back at the mothership to reflect this position.

Dividend Cycle

The final distribution of 2016 will be paid in December, and shares should go ex-div around the middle of the month. GILD just started paying a dividend in June of 2015. I have received a distribution on every GILD payday, and I don’t intend to stop.

There’s still time to establish a pattern, but it seems management has selected the June cycle to make increases, so I would expect the payment to stay at $0.47/share for the next two quarters. This trade will expire well before the ex-div date, and the premium is nearly double the dividend payout.

Investment

SPL (Strike Price Logic)

Considering I already happily own 53 shares of GILD at an aggregate cost basis of $91.33 across my various accounts, $74.50 represents a very attractive strike price.

At this strike price, the forward yield is 2.5% and the trailing (TTM) P/E ratio would be 6.56.

That is retarded.

I mentioned last week how some folks started speculating that Wall Street was maybe ready to wake up and actually give GILD some valuation credit for its drug pipeline. Well general market volatility and whackiness wiped that out, and this amazing strike price was available with both 15% annualized premium yield and 6% downside protection.

Another 100 shares would put me at pretty much a full position in GILD, and I’m not really trying to transfer ownership into a tax advantaged account or anything. But the thing is the option to own shares at this price is too good to pass up.

So I didn’t.

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