Yamana Gold Incorporated Call Options Sold for 70% Profit in One Month

On the 28th November 2008 we purchased Yamana Gold JAN 2009 Call Options at a strike price of $5.00 for an average cost $1.04 per contract, today we decided to sell these contracts for $1.70 each and bank a profit of around 70%. A few days ago these contracts were trading above the $2.00 level but gold has backed off and Yamana’s stock price had started to ease so we thought it prudent to close this position.

We chose Yamana Gold because we thought that this stock had suffered more than most during the current de-leveraging exercise and the dash for cash, and therefore considered its position to be an aberration when compared with similar stocks. At the time of purchase we noted that Yamana had a P/E ratio of 12, Kinross Gold is 26, Agnico Eagle is 46, Randgold is 56, something to consider as part of the investment decision-making process. However it has to be said that Kinross Gold, Agnico-Eagle and Randgold have also made tremendous gains.

Yamana Gold has a market capitalisation of $4.73 billion, a P/E ratio of 15.54, with 699.21 shares outstanding and is trading at $6.60 as we write, with current average volume at 20.00 million shares traded.

Yamana Gold Incorporated trades as AUY on the New York Stock Exchange and as YRI on Toronto Stock Exchange and as YAU on the London Stock Exchange.

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Comments

[de Graaf]

Nice play Bob. Congrats.
I jumped on the gold band wagon a little late this time around 825.
When gold headed to 880 I had a feeling we could reach the 900 barrier soon but it fell back heavily since the BoJ announcement on Dec. 18th.
Unfortunately, I didn't sell at the top for a 25 percent yield, but did sell at a reasonable gain of 14 percent in somwhat more than a week.

To please Bill ;) in terms of paper value;
I'm able to take the family-of-four away for a decent Christmas dinner on my behalf, for free.

Nice trade and Merry Christmas, in advance.

[Gold Prices]

All the best to you too de Graaf, have a really super break and come back on fire!

[Augustus]

Yes, and your last recommendation of AUY call option is down -97.5 %

[Doug]

I have question ? During the two trading days on gold the spot price was dropping even when the dollars was was trading lower against the yen and other currencies can you please explain Mr.Degraff what's going on? why the standard went into reverse. That is when gold should have been going up and not down during a weak dollar.
Sincerely
Doug

[Gold Prices]

Augustus, True - we do make mistakes.

[de Graaf]

Doug,

Which two dates do you mean?