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Silver Wheaton Corp. Message Board

  • cmegladon cmegladon Dec 6, 2010 1:14 PM Flag

    LT-Opine please

    Selling covered calls for Dec 42 with .87 premium?
    Or do you think this is in the process of popping the lid?
    I know, you'd rather wait for $30 silv close to answer right?

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    • I would not write covered Dec 42 calls @ $0.87 premium. The daily volatility plus strong upward price momentem means your almost sure to have your stock called away and the closing price on Dec 17 could easily exceed $42.87 which means you would be leaving money on the table.

      I would just stay pure long myself, but if your itching to make some premium and think SLW is a medium/long term buy then I would write naked Dec $40 puts @ $1.10 premium. Assuming you have the capital/margin to handle this your getting paid $ 1.10 for less than two weeks trading time + if SLW closes below $40 you get put the stock and end up with a basis of $38.90 on a stock you like anyway.

      IMO volatility numbers via the VIX and such are no longer reflecting actual market reality since they are now being heavily traded via derivatives and HFT action, so often you are not being paid what you should be when writing options. Buying options on the other hand can often land you a bargin.....

      Good luck whatever you decice!

    • yeah!!

      • 2 Replies to autodr1
      • I have no problem with this discussion on this thread I will say, thought, that I think you'd be crazy to write covered calls on SLW at this time. The underlying stock is moving up nicely. What will happen is either you'll have to buy to cover at a loss, or your position will be called away, you'll make a little bit of money, but be kicking yourself in six months that you would have made much more by holding. I've done OK in the past writing covered calls, and I'd honestly be looking for a stock that is moving in a more sideways direction.

        That said, who knows, the stock could go into a nice correction, and you'd be making money while the rest of us longs are watching our values shrink. I don't think that large of a correction will happen, but it is always possible.

        Best of luck either way, and let us know how it goes.

        Peace,
        Tom

      • No prob auto. Didn't mean to disturb anyone :)
        Consider the discussion over.

    • Sell Jan 55's

    • I know you did not ask my opinion, but here is my 2cents:

      My past experience in writing covered calls: DO NOT write covered calls on a stock that is rising, You will only get called away. Option writing is best used when a stock is going sideways or slightly downward. I was thinking about covered calls for december back when this stock was around 25. I would no longer be a holder of this stock if I had done that. Pretend you wrote the calls and then check the stock in January and see how you would have made out.

 
SLW
26.56-0.14(-0.52%)Aug 26 4:00 PMEDT