Gilead Sciences, Inc. (GILD) Bulls Eye a Bigger Bounce

Gilead Sciences, Inc. call volume is trading at two times the intraday average

Dec 5, 2014 at 1:15 PM
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Although Gilead Sciences, Inc. (NASDAQ:GILD) stumbled after hitting a record peak of $116.83 in late October, the stock found support near the century mark, and was last seen trading at $105.11 -- up 3.2% on the day. Amid today's analyst-induced bounce, calls are crossing the tape at two times the average intraday pace -- a change of pace to the withstanding trend -- with a number of speculators rolling the dice on an extended rise over the next six weeks.

GILD's most active option is the at-the-money January 2015 105-strike call, where 7,280 contracts are on the tape. The majority of the action has occurred on the ask side, and implied volatility is up 1.9 percentage points -- pointing to the purchase of new positions.

Today's call buyers will profit if Gilead Sciences, Inc. (NASDAQ:GILD) is resting above breakeven at $108.98 (strike plus the volume-weighted average price of $3.98) at the close on Friday, Jan. 16 -- when the back-month options expire. Profit is theoretically unlimited beyond here, while losses are capped at the initial premium paid, should the stock settle south of the strike at expiration. At last check, delta on the call was docked at 0.52, suggesting a 52% chance the option will be in the money at expiration.

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