Patrick's Rants

I added a covered call position in HMY using a buy-write order. Using the buy-write order, you can buy the stock and sell the covered call in one transaction which saves in commission costs. HMY hit my screener and I decided to add 100 shares to my account. I placed the order to buy using the January $9.00 calls while HMY was sitting at just over $8.00 for a net debit of $7.60.
Here’s what happened, HMY dropped to $7.99 and the call dropped to $0.39 – net price $7.60 plus commissions.
This one is going to be a sit and wait, but three things are possible.

1. The price goes above $9.00 by expiration, and I have to sell for about an 18% gain (in four months)
2. The price just kind of hangs where it is… It’s a gold mining stock; it’s more likely to be all over the place. If it just “hangs”, the calls will expire worthless, I’ll have collected about 5% premium (~15% annualized) and I’ll be looking to sell another round of calls
3. The price drops due to labor unrest (or any other reason, including bloggers on other web sites 😉 ), I keep the option premium and have to sit on it for a while before being able to sell more calls or close my position.