Precious metal stocks (and their underlying commodities) have become a mixed bag, especially with some global uncertainties seemingly cleared up, but this stock is pushing ahead nonetheless thanks to some company-specific catalysts in addition to higher gold and silver prices.
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The Stock – Pan American Silver (PAAS)
Precious metal stocks (and their underlying commodities) have become a mixed bag, especially with some global uncertainties seemingly cleared up, but Pan American Silver is pushing ahead nonetheless thanks to some company-specific catalysts in addition to higher gold and silver prices. As the name suggests, the company is one of the larger silver mining outfits in the world.
Analysts see sales (up 28%) and earnings (up 61%) surging next year, though the prices of gold and silver will obviously play a role. All told, Pan American is doing quite well today and has lots of upside as it makes progress on bringing other mines on-line.
Technical Analysis
PAAS got going with its peers near the end of May, nearly doubling in just over three months. The correction (20 to 15) after that was quick, and then the stock began to show plenty of support, with lots of weekly “tails” in the 15 to 16 area. And since the start of November, the buyers have been in control, with the stock decisively moving to new highs on solid volume. Stop - 18.25
The Covered Call Trade
Buy Pan American Silver (PAAS) Stock at 21.50, Sell January 22 Calls (exp. 1/17/2020) for $0.50, or a Net Price of 21 or less
Static Return: $50 per covered call (2.38%)
Breakeven: 21
Covered Call Return (if assigned): $100 per covered call (4.76%)
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 Net Price, or 21 or less. (In this case 21.5 minus 0.50 = 21. Or another example is you could pay 21.70 for the stock and sell the call for 0.70, which also equals 21)
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 …
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