Put Sales: Run Eagle Run AEM +$3...
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Message 25612780
Message #17128 from SliderOnTheBlack
5/1/2009 1:23:52 PM
Pigs Selling Puts...
Okay, who's the pig who's snarfing up the phat $9.80 premiums
on the AEM 2011 $40 Puts?
It's time to own up...
finance.yahoo.com
There are dunk shots and then there are...
pHi sLaMMa jAmmA MaMa dUnK sHOtZ.
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Message 25610564
From: SliderOnTheBlack 4/30/2009 3:49:24 PM
Selling Puts here?
You should be...
I like AEM put sales here, for example:
finance.yahoo.com
Jan. 2011 $30 Put is paying a phat $5.20 premium.
AEM announced a little production guidance stumble
today, with the keyword being "little."
Buy yourself some time... this one's sweet.
Lot's of others out there.
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Selling puts on pullbacks, given the positive underlying
fundamentals for gold, has been a license to print money.
Especially with the long dated put sales & LEAPs.
LEAP put sales give you the ability to be right on pricing,
but wrong on timing, and still profit greatly.
In this volatile environment you have two choices:
Use volatility, or be used by volatility.
Volatility has made calls pricey, but also has made
put sale premiums rich! Using put sales as a bullish
trade on stocks you want to own, is the single best
risk:reward trade you can make on pullbacks in the shares,
when the underlying fundamentals for gold remain strong, ie:
-- central banks cutting rates
-- central banks printing money
-- central banks buying/monetizing stocks
-- central banks buying/monetizing bonds
-- central banks diversifying AWAY FROM US Dollar denominated assets
You can close out the Jan. 2011 $40 PUT for $6 today.
$9.80 initial premium - $6 cost = +$3.80 profit on $6 cost
= +63% in less than a month, on a "defensive/safety" trade.
+63% is over 2 x what the underlying shares moved ($44 to $56 =+28%).
Twice the return as common shares.
And now today, you can take just the "excess return" and
buy some "zero cost" puts as insurance into this rally!
For example: You can buy some July $45 puts for .75 cents.
$45 ish has been pullback support for AEM during this trading
range... and you could potentially make a 10 bagger here if
we get another complete pullback. Cheap insurance with huge
upside... all paid for with merely a "small" portion of your
put sale profits.
finance.yahoo.com
If you wake up tomorrow and gold & gold stocks are getting
smacked down... you make money.
You matched the move in the shares and got free puts as
insurance. And you got the use of that phat $9.80 premium
for a month.
Same thing with the Jan. 2011 $30 strikes.
You can close out that trade today for $3.00 - the $5.20
premium = +$2.20 profit on $3 cost = +73%, or nearly 3 X
the performance of the underlying shares over the last
month.
You can close this trade and bank 1/2 the profits, and buy
"free puts" for downside insurance on the other half.
You can continue to let them ride.
You can cash out 1/2 and let the other 1/2 ride.
You can cash them all out and bank it all.
Or, if you feel things are getting toppy, you can cash them
out, along with cashing out all your shares, and use the put
sale profits to buy out of the money calls, giving you
continued "zero cost" exposure to any remaining upside, while
cashing out on this run.
2 to 3 X performance of the underlying shares on a "safety
trade" into a pullback, and with multiple options on how
you want to use the profits.
No More Whipsaws!
Use volatility - don't let it use you.
And keep using these put sales on all pullbacks in this
environment with such strong underlying fundamentals for
gold.
Mo later,
SOTB
PS: The "mechanical" legs on the US Dollar getting wobbly!
PPS: And don't forget: What do we do an ALL gap up opens?
Take "something" off.
Not all...
But, something.
And if you sold those puts, you can now buy some "free"
downside insurance, and/or upside exposure. |
