Silver Wheaton

A seller with a ton of supply evidently sat on Silver Wheaton yesterday, capping the stock even as Silver futures went bonkers.  Assuming bulls prevail, we can look for the SLW to reach 28.61, a Hidden Pivot, over the near term.  We hold 800 shares with a 12.95 cost basis, and I am once again going to suggest doing a covered write if and when the stock approaches the target. Short eight November 29 calls for around 1.55-1.60, stopping yourself out if SLW touches 28.81. The best way to get a fair price for the calls is to monitor the option bid/asked spread when SLW gets within 25 or so cents of the target.  By the time it finally gets there, you'll know the market for November 29 calls well enough to offer them advantageously. I've included a snapshot of an option calculator that I used to approximate a fair price.  The 43.6 volatility -- the heart of the solution -- was interpolated from TradeStation data. _______ UPDATE (3:10 p.m. EDT): In the chat room a moment ago, I recommended buying four Nov 27 puts for 1.72 against our long position in the stock. (Note: The order was filled about 20 minutes later.)

Silver Wheaton is closing on a Hidden Pivot at 26.43 that seems likely to stop the rally, if only for a short while. Let's try to scalp against our position (800 shares from 12.95), shorting four October 27 calls for 0.75. That's about how much they should be selling for with the stock at or near the target, but you may be able to improve on that price by monitoring the bid/offer as SLW approaches it.  Stop yourself out of the calls (i.e., cover them by buying them back)  if the stock trades 26.52 or higher. _______ UPDATE (11:55 a.m. EDT): We shorted the calls, which traded as high as 0.85, and we still hold the position, since the stock went no higher than 26.51.  We'll use an 0.80 basis -- midway between the low and high of the range as SLW approached the target. As before, you should stop yourself out if the stock touches 26.52. FURTHER UPDATE:  We scratched the trade -- give or take 0.10 -- when SLW head-faked to 26.57 later in the day. The stock subsequently pulled back to 26.01, ending the day on a weak rally.  On balance, the 14-cent overshoot of the target was mildly bullish.

We hold 800 shares with an adjusted cost basis of 12.95 against eight October 26 calls shorted for 1.00. Continue to bid 0.58 to cover half the calls and 0.48 to cover the rest. Check back intraday, though, since I may recommend covering them on a buy-stop near 0.80 if SLW turns unstoppable once again. _______ UPDATE (4:24 a.m. EDT): SLW is looking pretty feisty at the moment, so let's plan on covering all of the calls with a 0.92 buy-stop, o-c-o with a 0.68 limit bid . That means that if the calls trade 0.92 or higher, you buy them back with a market order, but if they trade 0.68 first, that's where to get 'em in.  _______ FURTHER UPDATE (12:31 p.m. EDT):  We scratched the calls, covering them for 0.95 or less.  For what it's worth, Comex Silver's weekly chart points toward an important intermediate-term high at 22.50, so there's plenty of upside left.

Yesterday's forecast caught the intraday high of a powerful rally to the exact penny, allowing us to initiate a covered write at an excellent price. We shorted eight October 26 calls for 1.00 just ahead of an end-of-day selloff that shaved 70 cents from the share price in less than an hour. Let's try to partially cover the position today so that we can re-short some more calls later:  Bid 0.58 to close for four calls, day order, and 0.48 to cover four more.  We continue to hold 800 shares with an adjusted cost basis of 12.95, but our goal in putting on the covered write is to further reduce the cost of our stock.

We hold a long-term position of 800 shares with an adjusted cost basis of 12.95 that yields a paper profit of more than $7000 at current prices.  Whenever this stock turns feisty, it reminds me what a juicy takeover candidate it would make. It's hard to say whether it is rumors or reality driving SLW now, but I'm not so keen to do covered writes as I was before. My upside target is currently 25.54 (midpoint, now support = 21.27), and at this point I'm inclined to simply buy a few puts if and when the target is reached. _______ UPDATE (10:31 a.m. EDT):  The stock has hit 25.09 so far today on a powerful opening-bar gap, creating a pattern that projects to 25.35. Let's put on a hedge when it gets near that price, shorting eight October 26 calls against our position.  Offer them for 0.96 -- or whatever they will fetch with the stock trading within a nickel of the target.  (Note: As of 1:21 p.m., it looks as though the options will be trading for around 1.00.)  _______FURTHER UPDATE (2:14 P.M. EDT):  We shorted eight calls for 1.00 off a so-far intraday high of 1.01. Do nothing further for now, but please note that the stock could go as high as 25.54 on a targeted basis. The intraday high as of the moment is 25.32.

We hold a long-term position of 800 shares with an adjusted cost basis of 12.95. Although I'd intimated that a resumption of our covered-write strategy would be appropriate when the stock pushed above 20, option premiums are a bit lean at the moment, and so we should wait for a possible thrust above June's key high at 21.89 before we act. Even if SLW is unsuccessful on the first or second try, put and call prices are likely to get a boost merely from the effort. From a Hidden Pivot standpoint, the stock looks like it's entitled to at least 21.36 (a Hidden Pivot off the daily chart, where A=17.88 on 7/28) before serious resistance encroaches. The midpoint associated with that number is 20.21, and therefore a logical place to try bottom-fishing with a camouflage strategy. ______ UPDATE:  The rally made it to 21.36 but got a little wheezy just above that pivot. Obviously, the stock is taking the measure of June's key high at 21.89, so we'll need to be patient. Although SLW's approach so far may lack for boldness, it is at least game.

We hold 800 shares with an adjusted cost basis of 12.95.  Our last covered write expired in May, but we’ll start using the strategy again if and when SLW consolidates above $20. In the meantime, SLW would need to push above 20.46 to hold the pull of gravity at bay. Otherwise, the stock looks vulnerable to a shakeout beneath late May's 17.00 low.

We hold 800 shares with an adjusted cost basis of 12.95.  Our most recent covered write expired in May, but we'll look to sell some more call premium against our stock if and when it pokes above $20. ____ UPDATE:  The stock is trading above $20, but this seems like a good time to be a little greedy, so we'll hold off on the covered write.  My next rally target is 23.72, and that is where we'll plan to lay out some call options.

We hold 800 shares with an adjusted cost basis of 11.75 against eight May 18 calls shorted for 0.64.   Continue to bid 1.84 to try to get the calls back.  This corresponds to a minor downside target for today of 19.83.  ______ UPDATE (12:57 p.m. EDT):  Our patient, two-week vigil was rewarded with the worst timing of any option trade we've attempted in recent memory, since we wound up covering the calls just as this morning's avalanche was starting.  Live and learn, as they say.  We still have a $4200 paper profit on our position and a new cost basis of 12.95.