Hecla Mining: Bought Call Options Today!

Today we purchased the JAN09 Call options at a strike price of $10.00 for $1.00 per contract for the Hecla Mining Company. As we can see from the chart the stock appears to be oversold having been sold down from the $13.00 level to close at $8.28 today.

Taking a quick look at the chart for silver we can see that silver appears to have found support at the $16.50 level and should be further supported by the rising 200dma. The technical indicators are turning positive which could result in a shot-term rally, hopefully boosting Hecla along the way. Read more.

Comments

[seriousinvestor]

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.

[Gold Prices]

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.