Gilead Sciences (NASDAQ: GILD - option chain) shares are headed higher today after the company posted a fourth-quarter profit of $568.2 million, or 60 cents per share, on revenue of $1.43 billion. Excluding one-time items, GILD earned $598.5 million, or 63 per share, beating analysts' projections of 55 cents per share. If you think that the stock won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on GILD.GILD opened this morning at $49.42. So far today the stock has hit a low of $49.20 and a high of $51.15. As of 12:25, GILD is trading at $51.03, up $2.80 (5.8%). The chart for GILD looks bullish and S&P gives GILD a positive 4 STARS (out of 5) buy ranking.
For a bullish hedged play on this stock, I would consider a May bull-put credit spread below the $40 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make a 13.6% return in just a few months as long as GILD is above $40 at May expiration. Gilead would have to fall by more than 21% before we would start to lose money. Learn more about this type of trade here.
GILD hasn't been below $40 since October and has shown support around $47 recently.
Brent Archer is an options analyst and writer at Investors Observer.
DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about. At publication time, Brent controls bullish hedged positions in GILD.
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