A net debit buy/write limit order was entered yesterday in Pan American Silver Corporation (ticker PAAS) to buy 300 shares and simultaneously sell 3 Call options at the May 22nd, 2026 options expiration date and at the $60.00 strike price. The net debit limit price for my order was $58.80 and this order was executed when 300 shares were purchased at $62.50 and 3 May 22nd, 2026 Call options were sold for $3.70 per share. Therefore, a maximum potential time value profit from the Calls of $.1.20 per share = [$3.70 options premium - ($62.50 stock price - $60.00 strike price)] is available for this position.
This position uses the Covered Calls Advisor's Dividend Capture Strategy since Pan Am Silver has an upcoming quarterly ex-dividend of $.18 per share on May 19th which is prior to the May 22nd options expiration date. This is equivalent to an absolute annual dividend yield of 1.2% and an equivalent annualized dividend yield of 10.5% = [($.18/$62.50) x (365/10 days to expiration)]. This dividend is included in the detailed return-on-investment calculations below. Either an early assignment on May 18th (the last trading day prior to the ex-dividend date) or on the May 22nd options expiration date would be desirable given the potential annualized return on investments for either outcome. Importantly to the Covered Calls Advisor, there is no quarterly earnings report prior to the options expiration date since the next earnings report on August 5th, 2026 is more than two months after the May 22nd options expiration date.
Pan American Silver Corporation is a large precious metals mining company that generates revenue by exploring for, developing, and operating silver and gold mines across the Americas, while also producing zinc, lead, and copper as by-products. Its business model is built around owning long-life mineral reserves and efficiently extracting and selling metals into global commodity markets, giving investors leveraged exposure to precious metal prices and rising industrial demand for silver. Pan American’s primary competitive advantages include one of the world’s largest silver reserve bases, a diversified portfolio of producing mines, operational scale, and deep technical expertise in mine development and processing, although profitability remains sensitive to commodity prices and geopolitical conditions in Latin America.
Pan American Silver passed all 18 criteria in my "Key Metrics for Comparing Companies" stock screener, which places it in the top 2% of the major U.S. companies considered in this stock screener. The average target price of the 18 analysts following Pan American Silver is $72.46 which is +15.9% above today's stock purchase price. The stock screener criteria and the actual numbers for PAAS are shown in the filter breakdown in the table below:
As detailed below, two potential return-on-investment results are:
- +2.0% absolute return (equivalent to +105.8% annualized return-on-investment for the next 7 days) if the stock is assigned early (on the last business day prior to the May 19th ex-dividend date); or
- +2.3% absolute return (equivalent to +85.2% annualized return-on-investment over the next 10 days) if the stock is assigned on the May 22nd, 2026 options expiration date.
The buy/write transaction was:
5/12/2026 Bought 300 Pan American Silver shares @ $62.50
5/12/2026 Sold 3 PAAS 5/22/2026 $60.00 Call options @ $3.70 per share.
Note: Implied Volatility (IV) of the Call options was at 54.0 when this position was transacted which, as preferred, is above the current VIX of 18.3. The probability that these Call options will expire in-the-money on the options expiration date was 64.2% when this position was established.
5/19/2026 Upcoming quarterly ex-dividend of $.18 per share.
Two possible overall performance results (including commissions) for this Pan American Silver Covered Calls position are as follows:
Covered Calls Net Investment: $17,642.01
= ($62.50 - $3.70) * 300 shares + $2.01 commission
Net Profit Components:
(a) Options Income: +$1,107.99
= ($3.70 * 300 shares) - $2.01 commission
(b) Dividend Income (If PAAS Call options exercised early on May 18th, 2026, the last business day prior to the May 19th ex-div date): +$0.00; or
(b) Dividend Income (If Pan American Silver stock assigned at the May 22nd, 2026 options expiration): +$54.00
= ($.18 dividend per share x 300 shares)
(c) Capital Appreciation (If PAAS Call options assigned early on May 19th, 2026): -$750.00
+($60.00 strike price - $62.50 stock purchase price) * 400 shares; or
(c) Capital Appreciation (If shares assigned at $60.00 strike price at the 5/19/2026 options expiration): -$750.00
+($60.00 - $62.50) * 300 shares
1. Total Net Profit [If option exercised early (business day prior to the May 19th ex-dividend date)]: +$357.99
= (+$1,107.99 options income + $0.00 dividend income - $750.00 capital appreciation); or
2. Total Net Profit (If Pan American's shares assigned at $60.00 at the May 22nd, 2026 expiration): +$411.99
= (+$1,107.99 options income + $54.00 dividend income - $750.00 capital appreciation)
1. Potential Absolute Return-on-Investment [If option exercised on business day prior to the 5/19/2026 ex-dividend date]: +2.0%
= +$357.99/$17,642.01
Potential Annualized Return (If option exercised early): +105.8%
= (+$357.99/$17,642.01) * (365/7 days); or
2. Potential Absolute Return-on-Investment (If Pan American's shares assigned on the May 22nd options expiration date): +2.3%
= +$411.99/$17,642.01
Potential Annualized Return (If PAAS' shares assigned at $60.00 at the 5/22/2026 options expiration date): +85.2%
= (+$411.99/$17,642.01) * (365/10 days)
Either
outcome provides a very attractive return-on-investment result for this Pan American Silver Corporation investment. These returns will be achieved as long as the stock is
above the $60.00 strike price at assignment. However, if the stock declines
below the strike price, the breakeven price of $58.62 ($62.50 - $3.70 - $.18)
provides 6.2% downside protection below today's stock purchase
price.
At least eight of the nine metrics used in the Covered Calls Advisor's Dividend Capture Strategy spreadsheet (see below) must be 'YES' prior to establishing a new Covered Calls position using the Covered Calls Advisor's Dividend Capture strategy. As shown below, all nine criteria are achieved for this Pan American Silver Corporation Covered Calls position.
