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« The Key Relationship between US Real Rates and Gold Prices | Main | Soon Be Christmas »
Saturday
Dec042010

 Silver Wheaton Corporation Shares Up 100.00% since Buy Signal of the 9th August 2010

SLW Comparison Chart 04 Dec 2010.JPG



On the 9th August 2010 we took the decision to reduce our exposure to a number of gold and silver stocks in order to pile into Silver Wheaton Corporation (SLW) . As the chart shows, so far so good, as SLW has increased in value by 95%. Gold and silver have done well, along with the HUI, GDX and the GDXJ. However they do lag behind SLW which is moving swiftly especially when you consider that it is a $13.62 billion company. The secret is of course in its business model which is that of a silver streaming company which secures supplies of silver from the miners of other metals where silver is a by-product of their operation. These contracts are long term and the purchase price is fixed so as silver heads north so will SLW as their earnings and profits will be monstrous, in our humble opinion.

We deployed a large portion of the funds by acquiring more of Silver Wheaton Corporation (SLW) stock for an average price of $19.76 and are pleased to report that they closed yesterday at $39.31 registering a gain of 100%. Not too shabby a performance over four months for a company with a large market cap.

Our history of trading in Silver Wheaton Corporation (SLW) is as follows:

Originally bought this stock for $9.41 and made another purchase on 15 July 2008 at $15.61 and a further purchase on 6 August 2008 at $11.43.

A smaller portion of the funds were utilized in our trading account as follows:
Early in September we piled into Call Options on SLW which also worked out fairly well as we reported on November 2nd, 2010 when we wrote:

Just a quick note to let you know that we have decided to take profits today and have sold all of our Call Options on Silver Wheaton Corporation (SLW). The profits were too good for us to refuse so we are taking the cash and going back to the sidelines.

We had four tranches as follows:

December 2010 $26.00 Calls @ $1.55, now at $4.20 for a gain of 170%
December 2010 $30.00 Calls @ $0.58, now at $1.81 for a gain of 212%

and

January 2011 $26.00 Calls @ $2.00, now at $4.75 for a gain of 137%
January 2011 $27.00 Calls @ $1.64, now at $4.10 for a gain of 150%.


So as we can see the change in strategy has worked out fairly for us and for those who have followed us into and out of these trades.

Looking down the road a short way we still expect gold prices to go dramatically higher even from this point, however, we also believe that silver prices will outperform them.

Apart from the ocaisional options trade on one of our sites the lions share of this activity is taking place on www.skoptionstrading.com where we have logged 53 winners and out of 55 trades. We are now considering capping the membership, so move now if you don’t want to miss out.



We currently have a number of open trades which we are pleased to say are all in positive territory.

sk chart 19 Nov 2010.JPG



The above progress chart is being updated constantly. However, to see exactly how it is going, please click this link.

So, the question is: Are you going to make the decision to join us today?


Stay on your toes and have a good one.

Got a comment then please add it to this article, all opinions are welcome and very much appreciated by both our readership and the team here.



To stay updated on our market commentary, which gold stocks we are buying and why, please subscribe to The Gold Prices Newsletter, completely FREE of charge. Simply click here and enter your email address. (Winners of the GoldDrivers Stock Picking Competition 2007)

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Reader Comments (3)

If Gold Bullion Is by default the new worlds reserve currency then it is reasonable to assume that the American dollars value will greatly diminish over a much shorter period of time then most analyst predict, it is also no secret as to how America will respond to this new global reality...

December 5, 2010 | Unregistered CommenterDrake Funes

Silver Wheaton Corporation..looks like you left a lot of the table
December 2010 $26.00 Calls @ $1.55, now at $4.20 for a gain of 170%...677%
December 2010 $30.00 Calls @ $0.58, now at $1.81 for a gain of 212%.....1279%

December 11, 2010 | Unregistered Commenterjoyce

joyce,

If we generate a good profit in a short time we usually take it.

Since that trade we have rolled the money into a later series of call options on SLW as we wrote below:

December 3rd, 2010

In today’s session in NYC we sold half of our position for $6.85 per contract effectively taking our cash off the table and retaining 50% of this position for free. These are the Silver Wheaton Corporation (SLW) Call Options which are the March 2011 contracts, at a strike price of $35.00, for which we paid an average price $3.31 per contract. These contracts were ‘out of the money’ at the time of purchase, November 8th, 2010, the price paid was all time premium.

Fast forward to today’s action on the NYSE and we have SLW trading at $39.20, which places these contracts ‘in the money’ as the time premium is now $2.54 and the intrinsic value is $4.36, or thereabouts, currently trading at $6.85, registering a gain of 105% in less than one month.

We have also had 59 winners out of 61 via our options trading service.

So, Joyce, did you follow us into this trade and are you still holding them?

December 11, 2010 | Unregistered CommenterGold Prices

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