The S&P 500 broke back above the 6,000 level for the first time since February last week as the indexes are now within striking distance of their all-time highs (though they do have some work to do). By week’s end, the S&P 500 had gained 1.5%, the Dow had rallied 1.2% and the Nasdaq had advanced by 2.2%
The Stock – Pan American Silver (PAAS)
A combination of factors—ranging from a growing interest from investors looking for protection against persistent inflation pressures to a potential re-acceleration of geopolitical turmoil—has resulted in the silver price hitting its highest level in 13 years. That move was the main driver behind across-the-board strength in the shares of leading silver miners, including Vancouver-based Pan American Silver, though there are also some company-specific factors at work, too, such as the company’s recent purchase of the tier-one primary silver miner MAG Silver for $2.1 billion (set to close later this year).
Analysts view this as a major development aimed at solidifying Pan America’s role as the leading Americas-focused silver producer. Under the terms of the transaction, Pan American will acquire all of Vancouver-based MAG’s 44% joint venture interest in the large-scale, high-grade Juanicipio mine in Mexico, operated by Fresnillo (one of Mexico’s largest gold and silver producers), which holds the remaining 56% interest in the venture. The acquisition is also expected to bring to Pan America’s portfolio one of the best, low-cost silver mines in the world and see it leading to a meaningful increase in the firm’s exposure to high-margin silver ounces.
Moreover, management views future growth opportunities through the significant exploration potential at Juanicipio, as well as MAG’s Deer Trail silver exploration project in Utah and the Larder property in Ontario (which analysts see containing substantial gold deposits in the highly productive Abitibi Greenstone Belt).
On the financial front, Pan American posted revenue of $773 million in Q1, a 29% year-over-year increase and led by higher realized gold and silver prices, with earnings of 42 cents beating estimates by a whopping 22 cents. Significantly, the outfit’s all-in sustaining costs (AISC, a key metric) for gold declined 1%, to $1,485 per ounce, while silver AISC dropped 10%, which should help boost profit margins going forward. Looking ahead, management expects production levels to increase over the coming quarters, while Wall Street sees the bottom line doubling in 2025 and continuing to rise nicely next year.
Technical Analysis
After a couple of sour years, PAAS changed character last March, zooming to multi-month highs and, while choppy, notching slightly higher highs over time as the months passed. This year’s trading has been hectic, with whippy action up and down depending on the market and precious metals prices, but last week’s rally looks decisive, with shares gapping to new highs. Stop – 25.5
The Covered Call Trade
Buy Pan American Silver (PAAS) Stock at 29, Sell to Open August 29 Strike Calls (exp. 8/15) for $2, or a Net Price of 27 or less.
Static Return: $200 per covered call (7.40%)
Breakeven: 27
Covered Call Return (if assigned): $200 per covered call (7.40%)
Please note, the stock and options prices will be moving throughout the day, so these prices are simply an approximation of prices that you should be able to achieve.
However, the important component of this equation is that the stock price paid, minus the premium received via the call sale, equals the approximate Net Price, or 27 or less. (In this case 29 minus 2 = 27. Or another example is you could pay 29.25 for the stock and sell the call for 2.25, which also equals 27.)
For every 100 shares of stock you buy, you can sell 1 call. For every 200 shares of stock you buy, you can sell 2 calls. And so on …
Open Positions
| Stock Name and Symbol | Price Bought | Current Stock Price | Stop | Option - Price of Call Sold | Current Option Price |
| ATI (ATI) | 67.8 | 85 | 54.5 | June 67.5 -- $4 | $17.50 |
| Coupang (CPNG) | 26.4 | 28.5 | 22.5 | June 26 - $1.25 | $2.50 |
| Birkenstock (BIRK) | 56.5 | 56 | 51 | July 55 -- $4 | $3.50 |
| Amer Sports (AS) | 38 | 38 | 31.5 | July 40 -- $2 | $1.25 |
| Rocket Lab (RKLB) | 26.75 | 29 | 22 | July 25 -- $3.55 | 5.5 |
The next Cabot Profit Booster issue will be published on June 17, 2025.
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