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I have been on vacation for 2 weeks and failed to post a message before I left about this trip.
I was in Montevideo, Uruguay and had a great time. Did not have access to the internet. (Well did not really try to find some), so I am back and will start posting again.
I only have one option expiring this week, on Silver Wheaton SLW. It is quite a ways out of the money, so will expire uncalled.
I purchased SLW at about $10.50 and have been writing the $12.50 calls two months out for about 2.4% per option return if uncalled. This give annual option premium of about 14%.
I am very positive on the longer term prospect for this company, so I am trying to make some option premium until the price rises.
This time when the market had tough days I did much better than the last downturn in February. I attribute this to a couple of reasons:
1. I am picking better stocks. Of course this makes sense, but I like small cap, high volatility stocks to write covered calls against, so picking good stocks is a challenge.
2. Better timing. I find stock I am interested in and pick them up when they have had a hopefully temporary drop. The day after earnings release is a good time to check on prices. If you like the stock, you have 3 months to earn options premium until the next earnings release.
3. Mixing out of the money and in the money covered calls. Having some ITM positions give a comfort level when the market drops. The OTM positions give more option selling opportunities at expiration.
Finally, the unexpired option premium in my account is less than the value drop this week, so I know my account will keep growing through these tough times in the market.
SLW: Summary for SILVER WHEATON CORP – Yahoo! Finance
SLW is one of my covered call holdings. I wanted to post a few thoughts on this company stock.
The company buys silver from mines that produce silver as a by product at a preset price of about $4 per oz. and sell on the open market. The company appears to be growing, highly profitable with low overhead (I think there are 6 employees).
The stock has run up nicely the last 4 days to about $11.75. My sold option is the June $12.50. There should be a quarterly earning release the end of June, so a pre-release price runup would not surprise me. If the stock gets called away I will wait until after the earnings number before considering another buy-write.
