I want to show a covered call on Barrick Gold ($GOLD). I'm very bullish on gold. With the economy in the state it’s in. It's May 30th Memorial Day weekend. And I just think gold has a lot of upside potential. Instead of getting into gold or silver generally, I would rather get into the miners, at least initially in the beginning of an upmove.
I also have some issue with $SLV being not indexed to silver. $GLD still is, I believe. However, it's much more expensive stocks. So, this is a good way to get started in gold as a proxy without owning physical gold. Generally, on a covered call, you want to go one monthly cycle out and one strike out-of-the-money (OTM).
We're on the July 15th expiration and we would normally do the $21 strike. On the first purchase, the cover, I usually go in the money slightly. What that does is it gives me some downside protection. You can do the 20 or the 19 and with a $2 premium, you're really protected against some downside. So, let's just do the 20 for purposes of this trade.
If you're going to buy it, just to go back you right click on the stock, then you go to buy and go over to ‘covered stock’. You can see that your net purchase is $19.28 and you do have some downside potential.
In Part II, Let's also look at how to simulate what you can estimate the value is going to be. To do that I'm going to ask you to go to our website at https://www.optionsonfire.com for part two of this covered call.
Prefer to watch on Youtube.com: https://youtu.be/P8or6gAq2gU
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