It’s time to take profits on Rollins Inc., a stock that seems to be stalling out, and also to clear out the options hanger in order to make room for more opportunities. 

Rollins . (NYSE: ROL), the global leader in pest control, has exterminated the profit blues for us since we recommended buying it in February of last year, but the stock is starting to get tired.  The company has been making acquisitions for a long time and although it has greatly increased its market share, it looks to be entering the inevitable consolidation phase.  It’s not a good idea to stick around during what could be a multi-month period of the stock going sideways.

Sell Rollins Inc. (ROL) for a 22% profit. Bought 2/22/16 at $27.38.  01/6/17 closing price $33.44.

Getting off the Gilead Sciences Train Straddle

This trade has gone mostly nowhere and it’s time to close it before the time value of the options erodes rapidly in the next six weeks. There has been an especially perplexing lack of movement in the stock given the fundamental background.  The trade was based on the stock’s generally low volatility – a usually reliable indicator of a big move in the future – and the fact that Gilead’s Sovaldi and Harvoni Hepatitis C drugs are among the most expensive medications on the market.  Because there is agreement between Trump and the Democrats on lowering drug prices, I expected the stock to move, most likely down. The call was a hedge against a surprising move to the upside.  Yet there has been little mention of the high drug issue for several weeks and stock has moved slowly lower while the straddle has done little. 

Sell Gilead February 17, 2017 (3^rd week) $77.50 Call (GILD_170217C00775000). Bought 11/15/16 at $1.65.  01/6/17 closing price $2.23.

Sell Gilead February 17, 2017 (3^rd week) $77.50 Put (GILD_170217P00775000).  Bought 11/15/16 at $5.15. 01/6/17 closing price $4.15.

Initial Straddle Value: $7.10.  Roll over value $5.15.  Straddle Value on 01/6/7 $6.38.

Dismount Diebold February 2017 Straddle

I am recommending the sale of the Diebold February 2017 straddle while it still has some value. The stock’s upside progress is too slow and the option is entering its last 30 days which will lead to rapid loss of time value.  It’s better to get out with something than to let it expire worthless.  The company is clearly in turnaround mode, but the market has not caught on to the story.  It is not out of the question that Diebold’s story will eventually catch on and the stock will make a more dramatic move to the upside. I’ll be watching it, but I am avoiding it in the portfolio.

Diebold February 2017 Strangle

Sell Diebold February 17 2017 $22.50 Put (DBD_170217P0022.5000).  Bought 9/23/16 at $1.15.  1/6/17 closing price $ 0.30.

Sell Diebold Inc. February 2017 $30 Call Option (DBD_170217PC0022.5000):    Bought 8/19/2016 at $1.40.   1/6/2017 closing price $0.175.  I have a position in this contract.

DBD Straddle Purchase Premium: $2.55.  1/7/17 Straddle Value $47.50. Return -81%.