Sell Novartis Calls for 75% Gain

By Linda McDonough • January 5, 2017

Sell to close the January 20, 2017 call on NVS with a strike price of $72.50 at $2.10 or higher for a 75% gain in 14 trading days. Symbol (NVS170120C72.5)

Novartis has steadily marched higher as investors rotate into drug stocks. Although the stock will likely move higher these call expire on January 20 so I’ll take the huge gain.

I expect we’ll be doing more trades in the sector so keep your eyes peeled for new trade alerts.

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Rick

01/05/17 ‐ 2:36pm ET January 5, 2017 at 2:36pm ET

Sold for $2.16 at 2:34 pm on Fidelity

Linda McDonough

01/05/17 ‐ 2:46pm ET January 5, 2017 at 2:46pm ET

Nice! Happy it worked for you.

Rick

01/05/17 ‐ 5:42pm ET January 5, 2017 at 5:42pm ET

Good call (no pun intended) on your part.

greenmaster

01/06/17 ‐ 4:28am ET January 6, 2017 at 4:28am ET

Hello Linda. Where does the 75% gain come in the picture? Also, don’t U have 2 own the stock 2 sell calls? I’m looking at buying straight calls above the 75 mark. I( still have those CAT puts U talked about. I bought more of them while the stock was up higher. Waiting now Is all I can at this point. Shall be interesting to see how the stocks pan out. Won’t be long. Thanks.

Linda McDonough

01/06/17 ‐ 10:01am ET January 6, 2017 at 10:01am ET

Hello,

I recommended buying the Novartis calls on December 13 when they were trading at $1.20. I sold them yesterday at $2.10 which gives you a 75% gain.

You do not have to own a stock to buy calls or puts. In this situation we sold a call that we already owned- the instructions for this are “buy to open” and then later “sell to close”. Some people sell calls or puts that they do not already own. This is called “selling naked” and exposes you to more risk but can be a good strategy. I have not recommended any naked put or call trades to date but will offer a complete explanation if I do decide to do that.

Under the Personal Finance tab there is a wonderful options guide that gives detailed explanations of the many flavors of option trades. It’s a great resource.

Thanks for the questions and I’m rooting for CAT to keep creeping down.

Best,
Linda

Linda McDonough

01/09/17 ‐ 1:40pm ET January 9, 2017 at 1:40pm ET

Hello all,
I’ve had a few questions from subs who missed selling the NVS calls last week. Don’t fret! The stock is still acting well and it looks like you can still sell them for about $2.10. However SELL THEM THIS WEEK. Sorry for the all caps but these options expire January 20th and lose value very quickly as you get close to expiration.
Best,
Linda

black arrow

01/09/17 ‐ 2:12pm ET January 9, 2017 at 2:12pm ET

Hi Linda,
I paid 3.50 for the CAT Option, and I currently see it is at 3.30 for the 178 FEB 17 92.50 PUT.I am inquiring about this since you are rooting for this trade you wrote – me too of course.

My question is at what price would you recommend selling the CAT option to get a reasonable profit yet avoid being assigned as well?
Thanks

Linda McDonough

01/09/17 ‐ 2:54pm ET January 9, 2017 at 2:54pm ET

Thanks for the question. You can only be assigned a stock when you sell short an option. In this situation you own the put so it is your choice to sell it, exercise it or let it expire. There is quite a bit of time before expiration so I expect the stock to decline well below our 72.5 strike price before then. When I formulate these trades I typically look for at least a 30% gain. It’s on my radar front and center so I will certainly issue a sell alert if the puts jump.
Best,
Linda

black arrow

01/09/17 ‐ 3:25pm ET January 9, 2017 at 3:25pm ET

Phew thats a relief, Now I can get back to the low stress of I just need to make the pizza from scratch- easy.
And thanks so much for that clarification!! Education can be so helpful. And you gave us a ballpark % gain also thats a great answer for me!
Thanks again

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