The precious metals sector was down hard yesterday on anticipation of further equity market upside post Trump Congress speech today. In this context, SLW was down most on twice average volume. While this would normally make us stay away from the shares, it offers excellent yields on the volatility spike, and a potential opportunity to build a position on the precious metal should the position be assigned:
- Indicative prices as per last close -
SELL SLW 16JUN17 $18 PUT = 1.02 (5.19% over 108 days, or 17.53% annualized)
SELL SLW 16JUN17 $17 PUT = 0.55 (2.80% over 108 days, or 9.45% annualized)
Comment
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SLW beat earnings yesterday and was indicated up some +3.5% after the close, in an otherwise weaker, broader market. Better earnings, and haven-seeking investors in what seems like the start of a market consolidation, should continue to support SLW and give further credence to our put-sale strategy above. Assignment at the strike levels above was initially not a concern in the context of this trade, and is even less so now. Remain short the puts.
Trade closed: target reached
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The stock was above both strikes at maturity. Assuming no assignment on the puts for those who shorted as per my recommendation. Take the money from the premium and repeat. Incidentally, WPM shares are back towards 19 as I write this comment, effectively calling for a repeat of the short-put strategy. I will put up another post with updated pricing.