The Covered Calls Advisor believes that gold miners are very attractive investments based on their potential for earnings recoveries over the next year. Also from a technical viewpoint, they are very oversold and are likely bottoming near current prices. Moreover, with likely ongoing quantitative easing monetary policies of central banks worldwide, gold will continue to be an attractive alternative investment. Gold mining stocks are likely to move significantly higher in the months ahead. The details on the two covered calls established today are as follows:
1. Barrick Gold Corp. (ABX) -- New Covered Calls Position
This is the second covered calls position established in Barrick. They are both at the $20.00 strike price, but the prior position was for Jun2013 expiration and this one is for next month's Jul2013 options expiration.
The transactions were as follows:
06/14/2013 Bought 300 ABX shares @ $19.70 The transactions were as follows:
06/14/2013 Sold 3 ABX Jul2013 $20.00 Call Options @ $.98
Note: the price of ABX was $19.70 when these options were sold.
Two possible overall performance results (including commissions) for this Barrick Gold (ABX) covered calls position is as follows:
Stock Purchase Cost: $5,918.95
= ($19.70*300+$8.95 commission)
Net Profit:
(a) Options Income: +$282.80
= 300*$.98 - $11.20 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If ABX price unchanged at $19.70 at options expiration in Jul2013):
-$8.95 = ($19.70-$19.70)*300 - $8.95 commissions; or
(c) Capital Appreciation (If ABX assigned at $20.00 at Jul2013 options expiration): +$81.05
= ($20.00-$19.70)*300 - $8.95 commissions
Total Net Profit (If ABX unchanged at $19.70 at options expiration in Jul2013): +$273.85
= (+$282.80 +$0.00 -$8.95); or
Total Net Profit (If ABX assigned at $20.00): +$363.85 = (+$282.80 +$0.00 +$81.05)
Two possible overall return-on-investments are:
1. Absolute Return (if ABX price unchanged at $19.70 at Jul2013 expiration:): +4.6%
= +$273.85/$5,918.95
Annualized Return If Unchanged (ARIU): +45.6%
= (+$273.85/$5,918.95)*(365/37 days); OR
2. Absolute Return if Assigned (at $20.00): +6.1%
= +$363.85/$5,918.95
Annualized Return If Assigned (ARIA): +60.6%
= (+$363.85/$5,918.95)*(365/37 days)
2. Market Vectors Gold Miners ETF (GDX) -- New Covered Call Position
6/14/2013 Bought 300 GDX shares @ $28.48
6/14/2013 Sold 3 GDX Jul2013 $29.00 Call Options @ $1.19
Note: the price of GDX was $28.51 when the options were sold.
Two possible overall performance results (including commissions) for this Market Vectors Gold Miners ETF (GDX) covered calls position is as follows:
Stock Purchase Cost: $8,552.95
= ($28.48*300+$8.95 commission)
Net Profit:
(a) Options Income: +$345.80
= 300*$1.19 - $11.20 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If GDX price unchanged at $28.48 at options expiration in Jul2013):
-$8.95
= ($28.48-$28.48)*300 - $8.95 commissions; or
(c) Capital Appreciation (If GDX assigned at $29.00 at Jul2013 options expiration): +$147.05
= ($29.00-$28.48)*300 - $8.95 commissions
Total Net Profit (If GDX unchanged at $28.48 at options expiration in Jul2013): +$336.85
= (+$345.80 +$0.00 -$8.95); or
Total Net Profit (If GDX assigned at $29.00): +$492.85
= (+$345.80 +$0.00 +$147.05)
Two possible overall return-on-investments are:
1. Absolute Return (if GDX price unchanged at $28.48 at Jul2013 expiration:): +3.9%
= +$336.85/$8,552.95
Annualized Return If Unchanged (ARIU): +38.9%
= (+$336.85/$8,552.95)*(365/37 days); OR
2. Absolute Return if Assigned (at $29.00): +5.8%
= +$492.85/$8,552.95
Annualized Return If Assigned (ARIA): +56.8%
= (+$492.85/$8,552.95)*(365/37 days)
