Wednesday, February 23, 2011 at 08:53PM
In today’s session in NYC we sold the second half of our position for $6.23 per contract, these were the Silver Wheaton Corporation (SLW) Call Options, the March 2011 contracts, at a strike price of $35.00, for which we paid an average price $3.31 per contract. These contracts were ‘out of the money’ at the time of purchase, November 8th, 2010, so the price paid was all time premium. The first half of this tranche was sold in December for a profit of 105%, so, 88% plus 105% divided by 2 gives us a profit of 96.5% on this trade.
You may recall that this is what we wrote then:
December 3rd, 2010
In today’s session in NYC we sold half of our position for $6.85 per contract effectively taking our cash off the table and retaining 50% of this position for free. These are the Silver Wheaton Corporation (SLW) Call Options which are the March 2011 contracts, at a strike price of $35.00, for which we paid an average price $3.31 per contract. These contracts were ‘out of the money’ at the time of purchase, November 8th, 2010, the price paid was all time premium.
Fast forward to today’s action on the NYSE and we have SLW trading at $39.20, which places these contracts ‘in the money’ as the time premium is now $2.54 and the intrinsic value is $4.36, or thereabouts, currently trading at$6.85, registering a gain of 105% in less than one month.
We now have until March before the remaining contracts expire so we will monitor them accordingly, as a spike in silver prices may just present us with an opportunity to sell a few more for a reasonable profit.
Taking a quick look at the chart the question is: Is this a double top or can SLW blow right through it and make a new all time high? The technical indicators are now in the overbought zone with the RSI standing at 71.92, so tread carefully. The chartists may well take profits here and who could blame them, however, there is still a little room to squeeze a tad a higher before we get a serious breather come along and spoil the fun. And should SLW exceed and hold above its previous high of $42.34 it will be into uncharted waters and it could well go on a bit of run. All depends on silver prices of course which are pretty volatile and will will remain so for some time to come.
Although we are of the opinion that silver prices have further to go we opted to cash in now as the time premium would erode the value of these options and silver might just experience a pull back, in which case we could be left with nothing.
Such is life in the Options Lane.
Tomorrow we will update you on the 'Accumulator' play as it to is running out of time.
Go Silver Go!
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