Pan American Silver (PAAS )* $16.15 – 3% dividend
An account related to LOTM bought shares of PASS for a trade today. PAAS is a silver miner with a strong balance sheet $542 million and $78 million in debt – They trade at 9.5 time forward earnings and have a nice trend of increasing the dividend. The price of PAAS dropped with the drop in gold and silver prices but has reached a support level. Broker Canaccord raised their opinion of PAAS from a hold to a buy and also raised its price objective up to $23.50 from $22.
An account related to LOTM bought shares of the stock at $16.20 and sold the April $17.00 call options for $0.40 and sold the April $16 put options for $0.65.
- If the share close trading on the April expiration date above $17.00, I will receive $17.00 from the stock sale for an $0.80 gain plus the money from the option sales of $1.05.
- If the shares close between $16 and $17 at the April expiration, both options expire worthless and I get to keep the $1.05 and the shares of stock.
- If the stock closes below $16.00 at the April expiration date, I have to buy more shares of the stock (because of the put sale) at $16 but keep the money from both option sales. My average cost from the first and second purchases of PAAS would be $15.60.
Would I buy PASS today at $15.60 – Yes – Would I be happy today selling PASS at $18.05 – Yes
In addition, the shock pays a $0.125 dividend between now and April options expiration.
If this is Greek to you consider the LOTM options mentoring program – available to only LOTM Subscribers only at a rate far below what you would pay elsewhere. $300 per five hours of mentoring. In person if in Minnesota is nice but distance is not a problem.
FROM Feb 25 Minyaville:
Pan American Silver (PAAS): The commodity company gets a Buy-from-Hold boost at Canaccord, which also takes its price objective up to $23.50 from $22. A strong balance sheet, financial discipline, and exploration and production opportunities are all viewed as favorable factors for the equity.
Three year weekly chart:
PAAS is still in a down trend but at an important support level. I am projecting that this is a an important bottom. If you are more of a trend follower, wait to buy until the share price closes above its 10 week moving (50-day) average. Currently that is at $17.62. As always when trading, keep a stop loss appropriate to your risk tolerance. A 10% trailing stop loss is a “normal” stop loss point.
* An account related to LOTM holds a position in this security.
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