Cabot Profit Booster 154

Last Friday was the expiration of our December covered call positions, and I’m happy to report it was yet another great month. Here were our final profits and yields:

Cabot Profit Booster 154

** Today’s covered call idea is the last trade of the year, as next Tuesday is one of Cabot Top Ten Trader’s two weeks off in 2020. And while there won’t be a new trade next week, my plan is to send an email looking back at the trades that made for a wildly successful first year of Cabot Profit Booster. **Last Friday was the expiration of our December covered call positions, and I’m happy to report it was yet another great month. Here were our final profits and yields:

MRVL - $140 per covered call, yield of 3.44%
GM - $295 per covered call, yield of 8.93%
PINS - $650 per covered call, yield of 12.15%
YETI - $375 per covered call, yield of 7.69%
CGC - $200 per covered call, yield of 8.7%

With the expiration of these five positions, our portfolio is only holding three covered calls, all of which are in good shape. And to add more market exposure, today we are adding a silver miner, which is trading just shy of its 52-week high. Here is the stock and our trade.

The Stock – Coeur Mining (CDE)
Why the Strength
After peaking in August and consolidating for the last few months, both gold and silver are once again showing signs of life—this time driven mainly by a weaker U.S. dollar (driving gold higher), while rising industrial demand is strengthening silver’s prospects, especially in the red-hot solar and automotive industries where the white metal is widely used. Coeur Mining, the world’s sixth-largest silver miner by revenue, explores, develops and operates silver and gold mining properties throughout North and South America. Analysts expect the company’s exposure to both precious metals to benefit the bottom line next year as production picks up and prices remain elevated.

Coeur is a cash-generating machine, and the stock’s recent strength was driven by the expansion of its Rochester silver-gold mine in Nevada, which managements said offers “significant reserve growth and the benefits of a larger-scale expansion project.” Coeur also said the latest technical report shows an 18-year reserve life with annual production expected to exceed eight million ounces of silver and 80,000 ounces of gold for the first 10 years after the expansion, which should result in $104 million of annual free cash flow. Elsewhere, its Wharf (South Dakota) and Palmarejo (Mexico) mines produced record free cash flows of $40 million and $45 million, respectively, in Q3.

Overall, revenue was 15% higher in the quarter while per-share earnings of 16 cents beat the consensus by 6 cents. Going forward, management guided for higher production and lower costs in Q4, while analysts see a 22% top-line bump and a 126% EPS increase in 2021.

Technical Analysis
CDE fell from 8 to 2 during the COVID panic, but shares quickly rebounded from the March low as safe-haven demand for precious metals and the companies that mine them picked up. By August, CDE had recovered to 9, where it then spent the next four months consolidating mostly sideways, refusing to give up much of its rebound. Now the stock has lifted off on good volume, and while volatility is high (Friday’s dip was a good example of that), we think the stock is buyable around here. Stop — 8.20

The Covered Call Trade
Buy Coeur Mining (CDE) Stock at 10, Sell to Open February 11 Strike Calls (exp. 2/19/2021) for $0.70 or a Net Price of 9.30 or lessStatic Return: $70 per covered call (7.53%)Breakeven: 9.30Covered Call Return (if assigned): $170 per covered call (18.28%)Please note, the stock and options prices will be moving throughout the day, so these prices are simply an approximation of prices that you should be able to achieve.However, the important component of this equation is that the stock price paid, minus the premium received via the call sale, equals the Net Price, of 9.30 or less. (In this case 10 minus .70 = 9.30 Or another example is you could pay 9.90 for the stock and sell the call for 0.60, which also equals 9.30)For every 100 shares of stock you buy, you can sell 1 call. For every 200 shares of stock you buy, you can sell 2 calls. And so on …

Open Positions

The next Cabot Profit Booster issue will be published on January 5, 2020.