Here in Canada, it was a bad week. On Wednesday a mentally disturbed lunatic shot a soldier standing guard over the National War Memorial in Ottawa, and then ran into the Parliament buildings before being shot to death by the Sergeant at Arms. There is no positive spin you can put on these events.
On the markets in the U.S., it didn’t matter. The S&P 500 traded below 1,885 on Monday, and closed Friday at 1,964. A 4% upward swing in a week would lead you to believe that all is well. It’s not.
And so, as I have documented on these pages in previous weeks, I have started selling, with a view to raising cash. I’m now at 13% cash, and I expect to do more selling this week. I’m not rushing to the exits and selling at any price, but in an orderly fashion I am liquidating. 50% cash is probably an appropriate target.
But what does one do with gold stocks? If you sell now and the world implodes, will you be forced to buy back in at a higher price? Perhaps.
So, on my quality stocks, I’m doing covered writes. This week I sold November call options as follows:
AEM.TO – Agnico-Eagle Mines Ltd. November 34 for $1.28
FNV.TO – Franco-Nevada Corp. November 60 for $1.90
RGL.TO – Royal Gold Inc. November 78 for $2.15
SLW.TO – Silver Wheaton Corp. November 22 for 88 cents
These calls were out of the money when I sold them, so if each of these stocks only increase by a small amount, or if they decline in price, between now and the third Friday in November, I keep the premium. If gold goes way up, I will have to buy back the stocks at a higher price.
Should I have just sold and moved to cash?
Perhaps. We will know soon enough.
Stand by, and let’s hope for a better week next week.
A Bad Week
by JDH on October 25, 2014
Here in Canada, it was a bad week. On Wednesday a mentally disturbed lunatic shot a soldier standing guard over the National War Memorial in Ottawa, and then ran into the Parliament buildings before being shot to death by the Sergeant at Arms. There is no positive spin you can put on these events.
On the markets in the U.S., it didn’t matter. The S&P 500 traded below 1,885 on Monday, and closed Friday at 1,964. A 4% upward swing in a week would lead you to believe that all is well. It’s not.
And so, as I have documented on these pages in previous weeks, I have started selling, with a view to raising cash. I’m now at 13% cash, and I expect to do more selling this week. I’m not rushing to the exits and selling at any price, but in an orderly fashion I am liquidating. 50% cash is probably an appropriate target.
But what does one do with gold stocks? If you sell now and the world implodes, will you be forced to buy back in at a higher price? Perhaps.
So, on my quality stocks, I’m doing covered writes. This week I sold November call options as follows:
AEM.TO – Agnico-Eagle Mines Ltd. November 34 for $1.28
FNV.TO – Franco-Nevada Corp. November 60 for $1.90
RGL.TO – Royal Gold Inc. November 78 for $2.15
SLW.TO – Silver Wheaton Corp. November 22 for 88 cents
These calls were out of the money when I sold them, so if each of these stocks only increase by a small amount, or if they decline in price, between now and the third Friday in November, I keep the premium. If gold goes way up, I will have to buy back the stocks at a higher price.
Should I have just sold and moved to cash?
Perhaps. We will know soon enough.
Stand by, and let’s hope for a better week next week.