The pharmaceutical sector has long been a sector where traders and investors chase big profits from biotech stocks.
Over the last several years biotech stocks have become a “safe haven” for income generation…if you know where to look.
In my Options Income Blueprint Service, we dipped back into this sector recently and found that you can still generate meaningful weekly option cash from a drug company.
[stock_market_widget type=”inline” symbol=”GILD” template=”basic2″ color=”default”] has long been a favorite income generating drug stock of mine, and the company may be the most most understood large cap on Wall Street and the most undervalued stock in the S&P 500.
Gilead boasts a net profit margin — a key metric for its industry — of nearly 33%, one of the highest of all its drug peers.
Recent headlines have hit the stock hard but despite the recent downturn, GILD has a bright future based on a new cancer treatment that recently received FDA approval.
There are both weekly and monthly call options on Gilead and they have robust premiums compared to many other stocks. The typical weekly call, sold at the strike price one dollar above the current share price can yield half a percent a week. That is the equivalent of a 25% percent a year income payout.
Last month, we sold a GILD weekly put option for $129. We rolled the position twice and bought it back 23 days later for $39. The result? Net cash profit of $345 with the 3 contracts we sold …a 1.73% return. Not bad for a “risky biotech.”
Gilead is not the only biotech to pump out weekly cash income. Biotech stocks like [stock_market_widget type=”inline” symbol=”CELG” template=”basic2″ color=”default”], [stock_market_widget type=”inline” symbol=”ILMN” template=”basic2″ color=”default”] and even a biotech exchange traded fund like the [stock_market_widget type=”inline” symbol=”XBI” template=”basic2″ color=”default”] can reward investors with rich weekly option premiums.
The next time you go looking for income from selling weekly options, don’t over look biotech stocks.
About The Author
Michael Shulman is a 30 Year Veteran of the financial markets – as a trader, a financial analyst, a financial writer and most recently as an educator.
Mr. Shulman made his first option trade in 1985 – COMPAQ Computer calls – a position that expired worthless. His second trade broke even; the third brought him a year’s salary, a near twenty to one return on his investment. Michael has never looked back. He entered the financial publishing business formally in 2001 as director of research for ChangeWave Research’s institutional research business and as the writer and editor of Hedge Fund Investing.
He has published two books – Sell Short and Made in America – both of which can be found on Amazon.com. Michael is a frequent contributor to reputable financial sites like Seeking Alpha, MSN, MainStreetInvestor, and Traders Reserve.
His trade recommendations in his Options Income Blueprint, Perpetual Income Portfolio Club and Income Masters services maintain a 98% success ratio, meaning his trades produce the expected income 98% of the time. No one’s perfect.