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« Silver Wheaton Corporation (SLW) Up 4.36% Today | Main | The Silver Sleuth »
Thursday
Oct282010

Silver Wheaton Corporation Call Options Up between 58% and 75%

Silver Chart 29 October 2010.JPG



Just a quick note to update you on our position regarding the purchase of Silver Wheaton Corporation (SLW) Call Options which we acquired on the 8th September 2010, covered in our post entitled Silver Prices: Dare to Dream.

So, on the 8th September we took the plunge and acquired a spread of Call Options on our favourite stock, SLW, with the following purchases.

December 2010 $26.00 Calls @ $1.55, now at $2.75 for a gain of 75%
December 2010 $30.00 Calls @ $0.58, now at $0.94 for a gain of 58%
December 2010 $35.00 Calls @ $0.18, sold at $0.20 for a gain of 11.11% Closed.

and

January 2011 $26.00 Calls @ $2.00, now at $3.30 for a gain of 63%
January 2011 $27.00 Calls @ $1.64, now at $2.80for a gain of 68%.


As you can see we sold our position in one set of the Silver Wheaton Corporation (SLW) Call Options, which were the December $35.00 contracts. We took the view that the time element is slowly ebbing away and the strike price was becoming harder to hit.

We paid $0.18 per contract back then and sold them recently for $0.20 which gives us a small profit of 11.11%, nothing to write home about, but we now have our cash plus a few more dollars which we have deployed into the latest skoptionstrading recommendations.

The ‘fall’ season is now in full swing with both silver and gold prices moving fairly violently in both directions with gold prices climbing to record highs and now standing at around $1343.60/oz, and silver prices standing at $23.96/oz.

We have also said in the past that silver prices will outperform gold prices before this bull market ends and in terms of percentage gains if you study the charts we have compiled recently you can see that over the short term this is now happening.

You may recall that we revamped our strategy recently by reducing our holdings in some of our gold and silver producers in order to buy more of SLW stock and have some cash available for options trades as we identify them. The objective being to boost our financial position as we have been doing with this stock, with gains of 103%, 106% and more recently 79%.

We also acquired more SLW stock on 9th August 2010, for an average cost of $19.76 per share, which appeared a tad expensive at the time, however, these shares now stand at $27.55, giving us a paper profit of 39% in a little over two months, which is not a bad gain for a stock with such a large market capitalization.

At the moment we are also making use of the recommendations as stated in our premium options trading service to boost our returns along with the occasional trade, like this one, being posted on this site.

Taking a look at the chart of silver prices, above, it can be gleaned that this pull back has been healthy for silver prices and note that it did not last long and was a shallow correction. Removing the froth has also lowered the technical indicators to a level on which an advance can now be based. Note that the RSI is sitting nicely at 61.89 and we suspect that it is about to hit the ceiling again.



And here is where we put our heads on the block. Next week we have elections in the United States, we also get to find out just how much money the Federal Reserve has decided to print in the sequel now commonly termed QE2. Allowing for a few days of turmoil and trigger happy moves in the market place we expect the metals to head north in a hurry with silver prices breaking out and hitting $29.00/oz around the 20th November 2010. This sort of micro analysis tends to make chumps of people, especially us, but it is the basis for holding our current position and the formulation of our exit strategy. That date and/or that target price will signal that its time for us to exit this current tranche of Call Options. Thats the plan and our definition of a plan is that it is a basis for change. If things develop faster we may move earlier etc.

As we try to understand the ramifications of these two events, we also have the release of the third quarter financial results on Monday, November 8, 2010, after market close, for SLW. They should be very good indeed, however, if they fail to meet analysts expectations then we could be hit by a bought of profit taking. Some good earnings results have already hit the wires this week including one of our favourites, Agnico-Eagle Mines limited, which we covered on gold-prices.biz. So, all we can do now is observe developments and see just how things unfold and maybe go and hit a tennis ball or two.

Taking a quick look at the chart we can see that SLW has pushed through the resistance at $27.00 and needs to hold those gains tomorrow, setting the stage for an even stronger rally in November. The RSI is now below the '70' level, perched at 58.75 which allows it to follow silver prices should they move higher next week.

SLW Chart 29 October 2010.JPG

Finally make sure that you have positioned yourself to take advantage of what we think will be a good rally in both gold and silver prices, right up to January 2011. Dips may appear from time to and are to be expected, however, if the longs can stand their ground, the pressure will mount on the shorters causing them to cover their positions and should they do it in a hurried fashion silver prices will really sparkle.

Silver Wheaton Corporation trades on the New York Stock Exchange and the Toronto Stock Exchange under the symbol of SLW.

The Company has a market capitalization of $9.48 billion, with 344.00 million shares outstanding, a 52 week trading range of $11.86 to $28.39 with an average volume of 5-7 million shares traded, although spikes in trading have seen 14 million shares change hands.



Back to our latest venture which was the launch of an Options trading service we are pleased to report that it is going very well so its a big thanks to all those who have signed up for it and the supportive emails that you have sent us.

Our premium options trading service, SK OptionTrader, has opened and closed 12 trades in the last 6 weeks, banking an average profit of 70% on these trades.

This brings our total of closed trades to 38, with 36 winners. This means that a subscriber who had invested $1000 in each of our 38 trades would have banked profits of $15,636.00. We have just posted a set of charts demonstrating the importance of timing in any trade on gold-prices, please click here if you are interested.


SK Chart 23 Oct 2010.JPG


The above progress chart is being updated constantly. However, to see exactly how it is going, please click this link.

So, the question is: Are you going to make the decision to join us today?


Stay on your toes and have a good one.

Got a comment then please add it to this article, all opinions are welcome and very much appreciated by both our readership and the team here.



To stay updated on our market commentary, which gold stocks we are buying and why, please subscribe to The Gold Prices Newsletter, completely FREE of charge. Simply click here and enter your email address. (Winners of the GoldDrivers Stock Picking Competition 2007)

For those readers who are also interested in the silver bull market that is currently unfolding, you may want to subscribe to our Free Silver Prices Newsletter.

For those readers who are also interested in the nuclear power sector you may want to subscribe to our Free Uranium Stocks Newsletter, just click here.







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Reader Comments (2)

I have been a long term follower and subscriber to both the Gold newsletter and the Silver newsletter among a host of other commodity research publications. Bob, I think you have made me more profits and more original thinking than all the rest combined...Actually, there isn't any real need for the others, inasmuch as when you find something of value in them, you get their permission and make it available to all of us sitting here in the cheap seats. I still read Casey, etc. but when push comes to shove the first one I read each morning is you. I have subscribed to your options trading service and read it dilligently each day, although I'm in a bit of a quandry right now. I am ALL IN to use your phrase. I was fortunate enough to buy all the SLW march, 2011 $21 calls I could several months ago at $3.70. This position coupled with several thousand shares of SLW, some HL, and BLYVVF constitute not only all of my investment capital , but all of my assets, period. So, along with you, I am a believer and stubborn enough to ride this pony for a while to come..Once again, thanks. Don McGahan

October 29, 2010 | Unregistered CommenterDonald R. McGahan

Donald,

Thank you very much for your kind words i will circulate them to the other members of the team as Im sure they too will get a boost from your missive.

Well you are sitting pretty with Calls on SLW, I dont understand your quandry, other than you need to determine an exit strategy - but thats all fun for you!

October 29, 2010 | Unregistered CommenterSilver Prices

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