Pegging it to 11 tomorrow would be great. I will bid 10c for the 50c straddles sold yesterday. Will look to sell next weeks strangles or straddles tomorrow, depending on where they trade it. 11 straddles for next week can be sold for 70c. That is plenty of premium to be wrong in both directions by end of the week and still make 50% before next Friday.
Pair trade hasn't moved so I added some more with SLW selling off this morning. They are getting more aggressive with the buyback, so I wanted to buy the dip down to 10.80.
Put on a little long SLW stock vs. short NEM for a pair trade. I keep seeing large SLW short blocks hammering the stock. Seems desperate for some reason. I want to see if they are about to get caught on the wrong side with the metals increasing and SLW selling silver and gold everyday here at higher prices and feeding it back into fewer and fewer shares.
All the price of Silver and gold. The case has been moved to the court system, so the only news that could come out now is the court date in 2017. No decision until at least 2018.
as long as the parent company is recognizing foreign earnings as cash flow for the parent company, then it would be subject to taxation by the Canadian government. SLW counts foreign cash flow as earnings and pays a dividend with them. I think the CRA has a case that I don't know how SLW can defend. I think the market obviously agrees. The market is putting about a 5% chance of SLW winning this case on the table. If they lose, $10 is fair value at current Silver prices as their earnings will only be about $50 million a year after tax liability. If SLW wins the case, then $30 would be about fair value. Meaning that the p/e would be about the same ( adjusted for the growth rate) . . Silver could rally and SLW should follow, but it will take about $20 Silver to get SLW back to 17 say. The downside on silver prices should now have a double negative affect on SLW's stock price while the upside should remain a 1-1 relationship at best. This destroys the thesis for investment should they lose and even destroys it while in the process of discovery. people long shares of SLW would thus be better off taking their losses in SLW and reinvesting them in SLV. I believe they would get the same upside but lose half as much on the downside should Silver fall. The court date will not be until 2017 and a judgment would usually take another 18 months after the conclusion of the proceedings. We are talking about 2019-2020 until this is resolved. This is the reason SLW is continuing to do business as usual. They will have 4 years to build up cash and grow until they have to cough up the $1 billion. But virtually all earnings for the next 4 years will have to be earmarked for the CRA in one way or the other. For 4 years the company will not be able to grow beyond its current assets without further credit. Equity has disappeared and cash will be earmarked.
Picked up 85c in pemium this week on shorting the 10, 10.50 puts and 10.50, 11 calls. That's an 8% return for the week. Will sell the straddle for next week on the close today at 10.50 and sell the wings next week after we decide which way to go. I think 11 is the most we can go on the upside and 10 on the downsiode for next week. We are building another bear flag. They have been lasting about 3-4 months which is in line for where the high IV is priced. So maybe end of March or early April we get teh next move. Should be able to collect a 30% return by then selling the puts and calls in the flag. If IV comes down before then, it will signal a move coming to break out of the range. As of now, there is very little risk in a move higher or lower of a magnitude greater than the premium collected. The straddle is paying a 6% return already for next week. I like the down side skew, so will probably sell some 10 puts as well in hopes I can sell some more for a higher premium on Monday if they hit gold. You would need one hell of an upside move in SLW to lose any money. It would take a move back to 13 next week before your shorts break even. I'll take that bet as this thing shouldn't go anywhere for a while as long as IV is high. Option buyers have boxed themselves in all the way out to March, so they should keep having to short into rallies and buy into dips which is why selling these straddles and strangles keeps paying out at such a high weekly rate. Let them shoot themselves in the foot for a while longer. When they give up and sell their puts and calls and drive down IV, it will be time to stop selling premium and start buying either stock or calls. A long way to go until stock can start to move up again. The positive articles never mention the fact that the stock physically cannot move as long as IV is this high.
I think the day of vindication means a $30 share price at current metals prices on a win. On a lose I think it will settle much lower, but very hard to determine because the company refuses to lay out a roadmap on the vehicles it would use to pay this bill. I'm sure that would depend on what the Canadian government would take. Would they take a future stream of payments, meaning, would they finance them against future cash flow? Would SLW be able to align credit and pay interest that way? Would they try to sell securities at depressed prices, probably not available. Would they sell a key asset? How would all of this affect their profitability? Will the company be able to pay a dividend if they lose? It may be gone or so small at that point that re-investment will not lower your basis enough to make a difference.
I would re-invest dividends as well If I were outright long the stock. It will just be a very long trade to get back to even depending on avg. cost but the company is not in jeopardy of being profitable. That being said, of course, they could win. That is why this has become a lottery ticket more than a metals correlation trade. They are asking for basically $100 million a year in taxes, which is 50% of their current profits going forward plus 28% a year going forward. So combined, that is 3/4 of their profits, which leaves the shareholders with not much to lean on in the event of a loss. Of course, they should leave Canada if they lose as it would be a roughly $60million a year difference could they find a jurisdiction with a better tax treatment.
Yes, I am short puts, so my net delta is long as well. Just reducing basis and collecting premium. I don't think this things gets away faster than you can manage the call position minus premiums. Meaning you can roll them up if need be. The stock should continue to not correlate directly with the metals because the profits may not belong to shareholders. We won't know this for a year or so, but it should keep a lid on the stock as investors line up to get money back on any jump in price. My short calls leave me short stock above 11.20 and 12.10 respectively, but combined with short put premium and those numbers are more like 12.20 and 13.40 for Feb. expiration. So plenty of room between $8 on the downside and $13 on the upside by Feb. expiration to make the necessary adjustments. Now that it is the hands of the court, there will be no surprise announcements, just a court date.
yes, but the bigger problem is that it will take new investment to raise the price beyond short covering, for which there are not many shorts in regards to a percentage of float. The thesis is to invest as a leveraged vehicle to precious metals exposure. The company no longer carries correlation as it may just be a cash flow machine dedicated to paying taxes for the next 5-7 years. Without exposure there is no reason to choose this over direct ETF investment. I can't see a scenario where this company tracks silver or gold on a high enough correlation to warrant the risks involved. The leverage implied to higher prices used to warrant the premium it traded at to silver. It trades at a significant discount now and should continue to do so until the tax issue is settled. Therefore there is no thesis to own it as you will not get the leverage to the upside and only be left with downside risk.
Actually, I was in the market for some black walnut and the guy wanted $1700 for a 16 foot, 20" wide piece about 2 1/2 thick that was milled and kiln dried but still had the natural edges and bark on it. I am going to make a bar with it. I offered him an ounc of gold and he looked at me for a moment and then said, OK. Gold was about 1050 oz. I got a btter deal when he saw the coin. Granted, this was not a publicly traded company and he makes the books himself, which I am sure it was more of a barter transaction. The point being is that Gold is definitely a powerful form of money and commanded an almost 50% premium to cash. Try it sometime if you are ever in the markt for things off craiglist or ebay or such, or especially when dealing with people outside the electronic payment system of the main stream. Yes, for coffee at Starbucks you will need your $4. The mom and pop shop will surely give you coffee for a week on an ounce of silver. Try it.
They may, but that won't solve the $1 billion dollar tax issue. Even if they moved, they would owe all earnings for the next 5 years or so. It's a lottery ticket now, but skewed to the upside. I think they win and it shoots to $30 and if they lose it drops to $5 and gets forgotten about for a while. Either way there is no longer correlation to the metals markets and thus no investment thesis. They are going to roll the dice and either flourish or go away. Not even at $10 do we see any insiders buying, they know that this is a gamble they would only take with shareholders money. There odds of winning are very small. Have you ever tried to sue the IRS? Everyone pays to play and SLW is no exception. If they had any idea of how they were going to pay this they would have let the markets know and the stock wouldn't be $10. They know they cannot pay it without a loan on horrible terms or a payment plan that eats all there profitability. So, again, it's now a lottery ticket. So I think you can make a triple or lose Half. LEAP calls are probably the best way to play it once they establish a court date. You could maybe sell the $5 puts in Jan 18 for 50c and use the proceeds to purchase the 20 calls for a debit of 40c. That seems a reasonably cheap way to play it for a 10 bagger and just hope it stays above $5 in 2 years. You can only lose 5.40 if it goes to zero, which shouldn't be the case. the company will always be profitbale and $5 would probably be a 30 p/e should they lose, so not too bad.
I agree the findings are without warrant, but unfortunately that is what governments do. The fact is that the fate of the company is now in the hands of the Candian government and the stock is a lottery ticket. Will probably trade $30 if they win and $5 if they lose. This is why I am trying to get long by continuning lowering my basis enough to accept this risk reward set up. The company has done a horrible job of laying out a framework for how they plan on paying for this and the moves they see themselves making. Right now it is just market speculation and that is the death knell for any company. I still firmly believe they come out intact at some point, just a matter of timeframe. they probably move out of Canada and finance the payment somehow. At what pain threshold, we don't know because the company is still in denial phase.
Ha, selling I meant to say. Got good premium for short calls to lower basis close to $8 for February expiration. I will have to do some rolling if we head higher but SLW doesn't even have a court date yet, so should keep heading lower while silver and gold rally. This should create more selling as well as people realize they no longer have exposure to metals via SLW, for the next or so. If we can get under $10 today, I may the roll the 11 calls down to the 10 calls and keep the 10.50 calls on. As we get down to $9 I will be looking to buy some long dated OTM calls to create a sizeable position with limited risk to catch the possibility of a SLW winning the CRA court case. The stock has basically become a lottery ticket down here as it is priced for no growth and basically just a service vehicle for fees. That being said, a victory in court would likely lead to a triple in price, so don't want to get cought short on such a move which would most likely be overnight. No need to buy calls until they establish a court date.
I have short 10 puts but will add some short 10.50 - 11 calls for more premium, I think the stock may need to head lower to adjust for the additional in 600 million in tax liability. The company now needs roughly $1 billion to pay taxes and the CRA moving forward on the auditing shows the strength of their case. The tax authorities rarely ever lose as they are the government. SLW has yet to outlay a clear strategy on how they will pay for this. With the LOC drawn down, the buyback eating into the cash, and a dividend, it doesn't leave much cash for the shareholders. $1 billion would be 100% of the next 5 years of profits and their forward tax liability would equate to an additional 56 million a year going forward at current prices. Any further weakness in silver and gold would literally cripple the company fro years to come. I don't think the company goes bankrupt, but they probably will not be able to grow for years and the dividend may go away, leaving the shareholders with nothing for years to come. But I guess that is why the stock is $10, a lot of his has been priced in. That being said, I don't see it getting much higher than 11 for many months unless silver explodes several dollars higher, which has almost zero chance of occurring with the world economy slowing down dramatically.
Funny how news get leaked days before its released to the public. I wonder who picked up the 3500 $11 Jan. weekly puts for .30c? Maybe its just good luck. Now we get to see another nine headlines of class action lawsuits as this one should be easier to get ahead of since the market action was so obvious.