Hecla Mining Company: Bought March $5.00 Call Options

Today we purchased a small number of the March 2009 Call Options (HLCA) for $0.10 per contract at a strike price of $5.00.

This trade is in addition to the Call Options we recently purchased in the $2.50 series and is in anticipation of the broad markets moving forward and silver making up some ground on its big brother gold. Hecla Mining stock has been battered over the last six months but lately has made a bit of a come back however it closed today at $2.55. We have been watching these options for some time and this dip presented us with the opportunity to pick up these contracts cheaply. We now have three months to see the price of silver rally and the silver producers move higher with Hecla Mining playing its part.

We raised the question of the Hecla’s fall coming to an end in a recent post entitled: Is the Free Fall Over? when the stock closed at $1.25. However we decided to hold off making any purchases until we could see some signs of life. As recently reported the company remains on track to meet the estimate of approximately 9 million ounces of silver production in 2008, at an average total cash cost in the range of $3.50 per ounce, which should bode well for the company in these difficult market conditions. We have bought Call options on Hecla Mining in the past which have failed dismally so don’t go too mad on this one.

Hecla Mining Company trades on the NYSE under the symbol of HL and has a market capitalisation of $432.23 with 169.50 million shares outstanding and has approximately $79.11 million in cash.

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Have a sparkling week.

Comments

[Di]

the good thing is that you bought only a small number. because the dow is going to be at 6500 in february, and silver will hit 6.60 , you still can buy puts though
good luck!

[Silver Prices]

Di, We think the that the DOW will head north first as you know, however how did you arrive at 6.60 for silver?

[BC]

I have been looking at the HL 2.50 / 5.00 vertical. Buy the 2.50 option and sell the 5.00 option for a net cost of 0.35. Below 2.50 is a total loss. Between 2.50 and 5.00 I get (price - 2.50), for example at 3.50 I take in 1.00. If the price is above 5.00 I take in 2.50.

I notice that you don't speak of vertical or calendar spreads. Any reason why not?

Will any of you be at the Orlando money next month?