Phantasmix Stock Market Blog

I wanted to buy more SLW (silver) but didn’t have the cash. Right now I’m trading the tax-free account and there’s an annual limit to how much I can add there. So, I got out of the XLF trade for a total profit of $3.20, and added SLW.

I added SLW twice since the initial buy-in on Feb 7. My ACB on it is $35.58. [ edited to add: current price (SLW: 35.96 0.00%) ]

A note on options: XLF options are fairly priced and track the stock very very well. Surprised me. SLW options are lagging behind. Didn’t surprise me

What’s up with the dollar? I still have some US$ left, should I just convert it all to Cad$?

I’m looking at this chart and think there’s a pretty good chance the stock will drop to $15 within 2-4 months.

It also sorta looks like an inverse Head-and-Shoulders (bullish) pattern? but I’m not entirely sure.

I want to buy the stock today! What if I buy it and the price drops? Based on this dividend capture strategy I came up with a solution that will work for me.

Here’s how it would look at today’s prices: I buy 200 shares at $16.65, sell 2x $15 June 2011 calls at $2.10.

• If the stock drops as I anticipate, I’ll buy the call back for less. For obvious reasons, can’t predict the profit at this point;
• If it doesn’t drop, and gets called away, I still make a profit of 1.8% net.

The plan is to hold XLF and write calls. Rinse-repeat.

So, in summary – if you can’t wait, buy early, then sell a deep in the money call, but not too deep so that you lose money if the stock is called away.

Calculation done using this covered calls calculator.

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Here’s the $BKX chart, the bank index. (The same is happening with (XLF: 14.735 0.00%) so I won’t post both.) There are some oscillator-price divergences and heavy resistance overhead.