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Thursday
May132010

Agnico-Eagle Mines Limited Call Options Update 12 May 2010

Just a quick note to update the team on the purchase of the MAY 2010 series Call Options at a strike price of $60.00 on Agnico-Eagle Mines Limited, (AEM) for which we paid a price of $4.64 per contract. These contracts closed today at bid $4.20 and ask $4.35 putting this trade about 8% under water.

We made the purchase on the 11th February 2010 when Agnico-Eagle was trading at around $58.00 area. The stock has had a rocky ride but rallied recently on the back of improved gold prices to close at $63.95 today. As these contracts expire on the 22nd May 2010 we must now look to close this position shortly even though it may mean taking a small loss.

Agnico-Eagle Mines Limited trades on the NYSE under the ticker symbol of AEM and on the Toronto Stock Exchange under the symbol of AEM.TO.

From time to time we get asked to comment on the market so its over to MarketWatch for this snippet:

By Myra P. Saefong, MarketWatch

TOKYO (MarketWatch) -- It'll be tough for metals to outdo the spectacular annual gains they saw in 2009, but a few have a shot and most are likely to continue to see prices climb this year.

That's not a bad assessment for a market that's already posted yearly price gains of around 24% in gold, 49% in silver, 117% in palladium and nearly 140% in copper.

This year, "all metals should fair reasonably well in 2010 as investors move to hedge themselves against inflation and U.S. devaluation, which will be major issues," said Sam Kirtley, chief executive officer of SK Options Trading.

And "by far, the metal we are most bullish on this year is gold, as we see continuing weakness in the U.S. dollar driving the yellow metal to new all-time highs, probably in the first quarter of this year," said Kirtley.


This leads on into this excerpt from SK Options Trading:

When looking at the leverage of gold stocks relative to gold prices, they do exert some leverage and regularly outperform the yellow metal. However by how much they outperform gold varies considerably, and it is hard to calculate how much leverage a stock will give you due to the external factors detailed above.

So in our quest for the best gold investment vehicle, one that exerts direct undiluted correlated returns to the gold price, with added leverage that is quantifiable to a reasonable accuracy, we think that options are the best choice. Options contracts are directly linked and correlated to gold, without the hassle of the external factors that often hamper gold stocks. Options are also not only a leveraged product, but one can tailor the leverage to suits ones preference, so it is possible to achieve a high level of leverage or a low level, whatever the investor desires, with the right combination of contracts.



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.

The latest trade from our options team was slightly more sophisticated in that we shorted a PUT as follows:

On Friday 7th May our premium options trading service OPTIONTRADER opened a speculative short term trade on GLD Puts, signalling to short sell the $105 May-10 Puts series at $0.09.

On Tuesday the 11th May we bought back the puts for just $0.05, making a 44.44% profit in just 4 days.



Over on our sister site, silver-prices.net we have been rather fortunate to close both the $15.00 and the $16.00 options trade on Silver Wheaton Corporation, with both returning a little over 100% profit.

If you would like to get a bit more bang out of your buck, then check out our Options Trading Service please click 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.

For those readers who are also interested in the silver bull market that is currently unfolding, you may want to subscribe to our Free Silver Prices Newsletter.

For those readers who are also interested in the nuclear power sector you may want to subscribe to our Free Uranium Stocks Newsletter, just click here.

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Reader Comments (1)

Have you looked at Rhodium which Kitco recently promoted?

John

May 15, 2010 | Unregistered CommenterJohn Ell

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