A.I.M. Users Bulletin Board

[SFSecurity]

Hi Toofuzzy, I'm a bit confused by your last post. You say:

...added 6% more shares of WPM by buying deep in the money LEAP call options ( $10 ) and selling $20 calls to more than cover the time premium.

I looked this up and am having a hard time seing how this works. The figures I played with assumed that only a single contract was involved and that you had approximately 1665 shares already with a per share cost of roughly $15, a total of roughly $25,000, just figures used to calculate how this works, not what you actually have.

What I got, using TDAmeritade's tools, is the LEAP for 2021 had a deep in the money $10 CALL option price of $7.75 with a time value of about $0.03 and an out of the money $20 CALL option price of $2.60 with a time value of about $2.50.

Yeah, you way more than succeeded in capturing the time value, but at a cost of about $515, net. If your actual cost per share that you currently are holding is below roughly $15/share, then you will break even if it is called away but if it is not then you would be out the $515.

If, on the other hand, the price dips down to $10 and you exercise the option, your cost per share would drop to about $14.72, or a total reduction of about $530, a bit above breakeven.

Given that it seems quite likely that there will be a bear market in the next couple of years, the only question is whether it will be just a bear market or a grizzly bear market. In order to exercise the $10 CALL WPM would have to drop about 45% from today's price.

Are these roughly the correct figures? If not could you please explain what I got wrong.

Thanks.