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1. I too think HL is at an attractive entry point but I bought the stock and some covered 1/9@$10 calls. I bought the stock for around $8.40 and sold the call for $1.05 so my net purchase price is only $7.35(before commissions). If the stock rises to $10 or more I’ll lose my position but that would in a $35+% gain in something like 7 months(60+% annualized). If the stock declines I have something like a 12.5% cushion. With your purchase of a call, your break even point is $11 so the stock has to go up over 30% in 7 months before you make anything. Obviously the most I can make on the trade is $2.65 while your gain is theoretically unlimited (although the stock would have to rise over 60% in 7 months for your trade to have earned more than mine and while that is a possibility I wouldn’t bet the house on that kind of performance). On the other hand, the most you can lose is $1 while I could theoretically lose $7.35 but if I though that was a realistic possibility I would want to own the stock at all. In fact, for my losses to exceed yours the stock would have to fall to below $6.35-almost a 25% drop in 7 months, which of course is possible but IMO not very likely.
   I appreciate the recommendation on HL and just thought I’d share another way to play it.

   Comment by seriousinvestor — June 18, 2008 @ 4:24 pm

2. seriousinvestor,

   Thank you for taking the time to explain your strategy to us which we will watch with great interest. Please keep in touch and let us know just how it works out for you. There is always more than one way to skin a cat and we decided to keep this trade simple. A nice start to this trade though as the contracts have gained 20% today to trade at $1.20.

   Comment by Gold Prices — June 18, 2008 @ 9:44 pm

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