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Bernanke Speaks on Capitol Hill and Precious Metals Plummet!! Gold Tanking…Options?! By: Tim Bolger

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Federal Reserve Chairman Ben Bernanke is speaking on Capitol Hill at the moment…During his speech the markets have all turned into the red and Gold is plummeting over $65 an ounce(11:50 am Eastern standard time)…Wow!! It is amazing how the Fed chief can move markets and metals prices in just a few seconds while addressing Congressional leaders and the American people.  I’m a long term bull on Silver and very bullish on Goldilox…Gold was trading down as much as $80 an ounce intraday.

So what is the options play on Gold tanking today?!

Trade#1: I would consider selling the $165 April 20, 2012 Put Options on the GLD for $4.25 a contract. Remember that in order to sell these 3 contracts, we need to have $49,500 in cash reserves in our brokerage account in case we get exercised on the GLD shares at $165 a share.  I am comfortable going long the GLD at $165 and therefore I like this trade alot…By selling 3 Put Option contracts, I will collect a premium of $1,275 minus trading fees. If the GLD bounces after this major sell off today and moves higher I will not get exercised on these shares at expiration. Either way, I like this trade and selling the Put Options will help finance the worst case scenario, in which I get exercised on 3 Put Option contracts (3 x 100= 300 Gld shares at $165 a share). Attached is the April 20, 2012 Options Chains on GLD courtesy of Yahoo Financehttp://finance.yahoo.com/q/op?s=GLD&m=2012-04.

Trade#2: I would consider taking advantage of this huge sell off in Gold today and think about buying the $165 June 15, 2012 expiration GLD Call Options for $4.80 a contract. I can buy 10 Call Option contracts for $4,800 plus trading fees and that will give me long exposure to 1,000 shares of GLD at $165 a share. My $4,800 investment will be worth over $10,000 if GLD trades to $175 by the June 15, 2012 expiration.  Attached is the June 15, 2012 Options Chains on GLD courtesy of Yahoo Finance:  http://finance.yahoo.com/q/op?s=GLD&m=2012-06. Good luck to all of the Goldilox bulls and stay tuned to Optionshoney.com for more Options action!! Show me the honey!!

For more conservative investors, I would stay away from the Options on GLD and just buy the GLD at $165 or less. The GLD is a great hedge on higher inflation and a weak U.S. Dollar…The other way to get Gold exposure is by purchasing 10 ounce gold bars or the beautiful 1 ounce Gold American Eagle coins. It is really nice to own the physical and fun to hold these shiny yellow bars/coins…and yes they are worth alot of money too!! I am also a big fan of owning shares of Canadian gold miner: Barrick Gold Corporation (ABX) at $45 or less a share.

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Greece Inks a Huge 2nd Bailout!! Metals Jumping! Options honey?! By: Tim Bolger

Photo courtesy of: http://www.iho-ohi.org/index.php/category/greece/

Athens Greece

Riots continue to escalate all over Athens throughout the long weekend and Greece inks a 2nd bailout deal with European finance officials to save the country from bankruptcy in the short term…such a beautiful country that has been crushed by sovereign debt issues and a very weak economy. The Dow Jones is flirting with 13000 and metals are jumping today on this breaking news on Greece…Gold is up over $26 an ounce today and I posted an article on Jan 17, 2012 about my long term bull case for Goldilox moving higher…here is my previous post on Gold: http://optionshoney.com/2012/01/17/can-you-say-goldilox-is-soaring-this-shiny-metal-is-hott-in-january-gold-options-honey/.  I suggested traders/investors think about buying the June 15, 2012 $165 strike Call Options on the GLD for $6.00 a contract. Those GLD Options contracts are spiking higher today and may still move much higher in the near term. The ishares Silver Trust(SLV) is trading 2% higher as well today.   I would recommend more conservative investors to buy shares of stock on the GLD and SLV for the long term…I like the GLD at $165 and the SLV at $29.

I am very positive on the miners going forward and I think there is still huge upside in that space…Many of the miners have underperformed the big rise in metals prices over the past few years and that is where I am seeing the most opportunity for investors seeking value plays.  I am increasing my position today on Hecla Mining (HL) by buying the Call Options and I would be a buyer of the Call options on General Molycorp(GMO) as well. Hecla Mining reported earnings today and the stock is soaring over 7 %…Business wire reports: Hecla Reports Record 2011 Revenue & Gross ProfitsBusiness Wire(Tue 8:00AM EST). Hecla Declares Silver-Linked Dividend and Adds New Minimum DividendBusiness Wire(Tue 8:15AM EST)

A quick profile bio on Hecla Mining courtesy of Yahoo Finance: Hecla Mining Company, together with its subsidiaries, engages in the discovery, acquisition, development, production, and marketing of silver, gold, lead, and zinc. The company produces lead, zinc, and bulk concentrates and sells them to custom smelters; and unrefined gold and silver bullion bars, which it sells to precious metals traders. It holds 100% interest in the Greens Creek operating unit located near Admiralty Island in Alaska; and 100% interest in the Lucky Friday operating unit located in Idaho. Hecla Mining Company founded in 1891 and is based in Coeur d’Alene, Idaho.

http://www.hecla-mining.com/exploration/ Chart below is on Hecla Mining Silver Growth:

Silver Growth

What is the Options Play on Hecla Mining?!  

Hecla Mining(HL)  is jumping over 6.5% today and I would think about buying the March 16, 2012 $5 strike Call Options on HL for .45 cents a contract.  Attached is the March 16, 2012 Options Chains for HL courtesy of Yahoo Finance:  http://finance.yahoo.com/q/op?s=HL&m=2012-03.

I would also consider buying longer term options contracts on HL further out to give us a little more time for a continued rise in the shares of HL.  I like the HL June 15, 2012 $6 strike Call Options for .25-.30 cents a contract. Attached is the Options Chains on HL for June 15, 2012 expiration courtesy of Yahoo Finance: http://finance.yahoo.com/q/op?s=HL&m=2012-06. Stay tuned for more big trades at http://www.Optionshoney.com!!

See below the 5 day technical chart on Hecla Mining (HL) courtesy of Fidelity Investments:

Chart

Can You Say Goldilox is Soaring?? Flight to Safety? This Shiny Metal is Hott in January!! Gold Options Honey? By: Tim Bolger

Who does not love Gold?? Well, maybe not everyone because it does not pay a dividend to investors.  But, I love this shiny metal!! Like Gold or not, it has been a big winner for many investors over the past few years and has provided alot of alpha to investment portfolios that would have otherwise suffered severely from high exposure to financial stocks, the sovereign debt crisis, volatile global stock markets and high unemployment around the globe.

We all know that thus far, the Federal Reserve’s monetary policy has involved printing way too many U.S. dollars to fight this recession, has kept the Federal Funds Rate at historic lows, and the result has been a very weak U.S. dollar… I translate the current economic scenario as one that makes me want to buy lots of Goldlilox!! I love gold coins and love owning the Gld.  Getting long exposure to Gold is easiest to get with the Gld (SPDR Gold Trust).  Gold hit a high of over $1,900 per ounce in 2011 and then got hammered along with several other precious metals in the month of Dec 2011. Gold fell close to $1,500 an ounce…that was painful for many Gold bulls in the money of Dec and led them to flee to the sidelines, many of which were forced to sell because of big margin calls on this commodity. Margin gives you great leverage at times, but it is very risky for volatile commodities in the short and long run…Margin calls can wipe you out of cash and trading on Margin is not recommended for many retail or institutional investors.

The sharp sell off in Gold in the month of Dec 2011 spooked alot of Gold bugs out of this shiny precious metal. Was the massive gold sell off just a huge head fake or is the bull run in Gold over?!…I think it was more of a short term correction in the shiny yellow metal…the sell off I believe was further exacerbated by lots of profit taking, margin calls and a short term phenomena. I am a firm believer in owing Gold for the long term and as a means to protect wealth…I believe Gold is a great safe haven from all of the macro-economic uncertainty prevailing around the globe!! Gold protects us against a weak global equity market and a weak U.S. dollar(which means high inflation).  Gold is a great hedge against major global economic issues(eg sovereign debt crisis in Europe), but I also believe that Gold can still run to $2,100 an ounce even if the global equity markets continue to move higher…Over the past 3 weeks we have seen Gold spike higher and I think the Gold train continues to run higher baby!!

Options trade#1: Yahoofinance Gld Jun 15, 2012 Options chain: http://finance.yahoo.com/q/op?s=GLD&m=2012-06.  I would consider buying the Gld 165 Jun 15, 2012 Call Options for $6.00 a contract. 5 contracts will cost me $3,000 plus trading fees and get me long exposure to Gold(500 shares of the Gld SPDR Gold Trust at $165 a share). If Gld trades to 175 before this options’ expiration date, this trade will be worth $5,000+. Take a look at the yahoofinance chart below on the Gld. Gld has moved significantly higher after being crushed in the month of December and I believe the longer term trend is to the upside. Good luck longs and remember that this is just a hypothetical scenario for everyone. Consult your financial advisor before making any trades…see the Optionshoney disclaimer. Options trading is not for all investors and is very risky!! Do not play if you cannot afford to lose all of your money invested in the contracts you may decide to purchase. Optionshoney  disclaimer.

The more conservative play is just buying these lovely American Eagle Gold Coins exhibited below and hold them forever!! Several other Gold Coins and Gold Bars are available for purchase from vendors such as Monex.com. Photo is courtesy of http://www.monex.com:

American Gold Eagle Coins - Buy Gold American Eagles

Chart forSPDR Gold Shares (GLD)

Rare Earth Miners Moving Higher Today…Options Play on Avalon Rare Metals(Avl)!! By: Tim Bolger

Rare Earth Miners mine rare earths deposits and mineral resources that are used in the production of everything from magnets to hybrid vehicles, flat panel televisions, digital cameras, disk drives, ipods, Mp3 players, etc. Over the last few years the supply concerns of Rare Earths have been a major catalyst for the exponential price increase in the cost of these rare earths deposits that are so vital to the continued production of many technology products and devices sold around the globe.

A few of the Rare earth miners that I follow closely are Lynas Corp(Lysdy.pk) , Molycorp(Mcp), General Moly(Gmo), and Avalon Rare Metals(Avl).  Avalon Rare Metals will be our rare earth miner in focus for today and is soaring 8% higher on big volume.

A brief bio on Avl courtesy of yahoofinance: http://finance.yahoo.com/q/pr?s=AVL+ProfileAvalon Rare Metals Inc. engages in the exploration and development of rare metals and minerals in Canada. The company primarily explores for the rare earth elements, such as neodymium, terbium, and dysprosium; and other rare metals and minerals, including lithium, tantalum, cesium, indium, neodymium, terbium, dysprosium, niobium, gallium, zirconium, and calcium feldspar, as well as tin. Its principal property includes the Nechalacho Rare Earth Element project located at Thor Lake, Northwest Territories…(yahoofinance)

Check out the Avl mining projects in the works: http://avalonraremetals.com/projects/ This is the Thor Lake project: http://avalonraremetals.com/projects/thor_lake/thor_lake_intro/

Over the past 52 weeks, Avl has traded in a range of 2.29-10.11.  Despite the huge pullback from Avl highs, I think rare earth deposits will continue to be scarce over the long term and this will drive  both rare earth prices and these small cap miners much higher in value…As you can see from the yahoo finance chart below on Avalon Rare Metals and Molycorp, both of these stocks hit all time highs in early 2011 before getting crushed. I think in 2012, we will see a big bounce in these rare earth miners and several other miners.  We also may see some M & A in this space as the bigger players gobble up a few of the smaller competitors.  Another one of my top picks is Australian Miner Lynas Corp. Check out Lynas at http://www.lynascorp.com/.

Options Trade#1: Here is the yahoofinace Avl options chains for April 20, 2012 http://finance.yahoo.com/q/op?s=AVL&m=2012-04.  If I were to try and capitalize on a move higher this spring on Avl, I would look at selling the Avl $3 April 20, 2012 Put Options for .55 cents. If I sell 20 contracts, I will collect a premium of $1,100 minus trading fees. Keep in mind, I need $6,000 in cash in my account in case I get exercised at $3 per share and have to purchase 2000 shares of Avl stock.  Best case scenario, I collect the $1,100 premium and do not get exercised, but I am very comfortable getting long 2,000 shares of this stock at $3 if I do get exercised. I will get exercised only if Avl shares close below $3 at the April 20, 2012 expiration date. The net purchase fee of Avl if I am exercised will be $6,000-$1,100 premium collected for selling the Put Options. That means I will get my 2,000 shares of stock for only $4,900 plus trading fees. That is one of the beautiful things about selling Put Options on a  stock that I already want to go long on.  I think Avl could run back to 7-8 dollars in 2012 if the Rare Earth Miners continue there move higher after get crushed last year. Over the next decade we could see a huge move higher in the value of these Rare Earth Miners and especially a few of my top picks: Avl, Gmo, Lysdy.pk, and Mcp.

Options Play#2: Here is the yahoofinance options chains on Avl for April 20, 2012 http://finance.yahoo.com/q/op?s=AVL&m=2012-04

If I were to buy Call options and take a speculative play on a continued move higher in Avl shares over the next 3 months, I would consider purchasing the Avl $3 April 20, 2012 Call Options for .50 a contract or $50 a contract(.50 x100 shares per contract=$50). If I buy 40 contracts, that will cost me $2,000 plus trading fees and no matter what the stock does, my total capital at risk is the cost of the options contracts plus trading fees. If I just buy to open the Call Options contracts, I do not have to hold $12,000 cash in my account as collateral to purchase the actual shares in case of getting exercised.  So, for 2k plus fees, I would get long exposure on 4,000 shares of Avalon Rare Metals at a strike price of $3 (40 contracts x 100 shares per contract =4,000 shares). If Avl runs to $5 in the next few months, the contracts will be then worth $8,000 plus depending on how much time value is left before the expiration date of the Call options. Remember the “Premium paid for buying Call options is three fold”: the time value premium + the intrinsic value (how much the option is in the money)+ volatility in the stock= Options Premium paid.

Fyi, A “Call Option is in the Money if the actual stock or asset we are purchasing the contracts on is trading higher than the strike price of our Call Options contracts that we may own. For example, if we own $3 strike Call Options on Avl and the stock is trading at $3.15. The stock is .15 cents in the money or $15 per Call Options contract we own on the Avl stock. Therefore, in this example the intrinsic value of the Avl $3 strike Call Options contract would be .15 cents or $15 per contract. It is also important to remember that if our Option at expiration is even 1 cent in the money our broker has on obligation to exercise the shares on us. Therefore, if you do not want to purchase the shares, you need to call your broker and tell them to let the options expire worthless.

http://finance.yahoo.com/q/ta?s=AVL&t=5y&l=on&z=l&q=l&p=&a=&c=Mcp

Chart forAvalon Rare Metals Inc. (AVL)

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