Most Active Options Update: Gilead Sciences, Inc. (GILD)

Gilead Sciences, Inc. option traders expect a bounce off the century mark

Nov 17, 2014 at 2:09 PM
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The 20 stocks listed in the table below have attracted the highest total options volume during the past 10 trading days. Names highlighted are new to the list since the last time the study was run, and data is courtesy of Schaeffer's Senior Quantitative Analyst Rocky White. One name of notable interest today is biopharmaceutical concern Gilead Sciences, Inc. (NASDAQ:GILD), which is testing support at the century mark.

Most Active Options Table

Gilead Sciences, Inc. is down 1.7% at $100.32, bringing its month-to-date deficit to 10.4%. Since mid-August, the stock has ended just three sessions south of the century mark -- all in mid-October, amid the broad-market swoon. As such, speculators today are rolling the dice on a rebound for GILD this week.

The security has seen roughly 37,000 calls cross the tape, compared to fewer than 21,000 puts. Most active is the out-of-the-money November 105 call, where about 6,700 contracts have exchanged. While the International Securities Exchange (ISE) confirms that some of the contracts were bought to close, data from Trade Alert suggests some are being bought to open.

Implied volatility (IV) at the strike has popped 5.7 percentage points, and 84% of the contracts traded on the ask side -- collectively hinting at newly bought bullish bets. By purchasing the calls at a volume-weighted average price (VWAP) of $0.74, the buyers will begin to profit if GILD climbs back atop $105.74 (strike plus VWAP) by Friday's close, when the options expire. Risk, meanwhile, is capped at the initial premium paid for the contracts, should GILD remain south of the strike through the end of the week.

Meanwhile, the closer-to-the-money November 103 call has seen more than 2,900 contracts change hands, more than three-quarters on the ask side. IV has jumped 4.6 percentage points, and volume exceeds open interest, making an even better case for buy-to-open activity.

The VWAP of the 103-strike calls is $1.24, putting at-expiration breakeven at $104.24. Again, risk is limited to the initial cash outlay, should GILD fail to reclaim $103 by week's end.

While short-term call buying has gained traction recently, the broader sentiment tides still favor the bears. The equity's Schaeffer's put/call open interest ratio (SOIR) of 1.07 stands higher than 82% of all other readings from the past year, suggesting near-term traders are more put-heavy than usual right now.

Outside of the options pits, though, 14 out of 17 analysts offer up "buy" or better ratings, with not a "sell" in sight. Plus, the average 12-month price target of $122.63 represents a premium of roughly 22% to Gilead Sciences, Inc.'s (NASDAQ:GILD) current price, and analysts at UBS recently opined that the "market is starting to underestimate Gilead's commercial prowess despite an overall HCV package that is first and best in class."


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