Newmont Mining Corp. (NEM) is scheduled to announce its quarterly earnings on 1 November at 4 pm EST. What do they do? Newmont Mining Corporation is one of the largest producers of gold and copper. They have mining operations all over the globe from the embattled Uzbekistan to the United States.
It was reported in December 31, 2005, that Newmont had proven and likely gold reserves of 93.2 million equity ounces and 50,600 square miles of land. The company also dabbles in banking and mining exploration.
Copper futures are up this year, they started the year around $1.75 but have stagnated around $3.50 since May. Gold futures started the year around $550, spiked in May and have steadily decreased to close at $587.60 on October 24, 2006.
So, for all of their gold stockpiles, the worth of those stockpiles is up only a fraction from the beginning of the year. So will all this information have an effect on their earnings announcement on November 1? The AP reports, “Gold miners are expected to post strong third-quarter results as the price of the yellow metal hovered in historically high territory during the period, despite a slight pullback from the previous quarter.”
However, Pierre Lassonde, president of Newmont Mining, filmed a short segment on thestreet.com on Monday 22 October 2006 outlining his position as to why Newmont doesn’t believe in hedging and about a recent seizure of their mining assets in Uzbekistan.
Falling gold prices, Newmont’s policy of not hedging and the seizure of their assets say one thing to me – Sell !! We just need a method to turn this theory into income.
This, however is not a no-brainer-slam-dunk. So, the reward should be commensurate with the risk. We must employ the use of a solid stock options search engine like, SmartSearchXL, the one offered by PowerOptions. I’m digging a little deeper into the well of tricks this time and talking about bear call credit spreads.
If you’re saying, “What the heck are bear call credit spreads.” Funny you should ask because what gets me through the night is remembering that Bill Gates didn’t know what a computer was when he was born, but he learned. We may not have upper-middle class parents to send us to prep schools and Harvard, but we do have PowerOptions to help us with our options trading knowledge. And using the bear call credit spreads search engine (offered as part of PowerOptions membership) we may find an answer.
Bear call credit spreads are where one call option is sold and one option is bought at a different strike price for a net credit with no covering stock. Using PowerOptions SmartSearchXL to search for bear call credit spreads on October 24, 2006 with all options expiring on November 17, 2006 (November options expiration day), the following positions for NEM were returned:
|SmartSearchXL Bear Call Credit Spread Search on October 24|
|NEM||43.63 (+0.38)||NEMKJ||06 NOV 50.0 (24)||0.10||NEMKX||06 NOV 52.5 (24)||0.05||2.0|
|NEM||43.63 (+0.38)||NEMKJ||06 NOV 50.0 (24)||0.10||NEMKK||06 NOV 55.0 (24)||0.05||1.0|
|NEM||43.63 (+0.38)||NEMKW||06 NOV 47.5 (24)||0.35||NEMKJ||06 NOV 50.0 (24)||0.15||8.7|
|NEM||43.63 (+0.38)||NEMKW||06 NOV 47.5 (24)||0.35||NEMKX||06 NOV 52.5 (24)||0.05||6.4|
|NEM||43.63 (+0.38)||NEMKI||06 NOV 45.0 (24)||1.00||NEMKW||06 NOV 47.5 (24)||0.40||31.6|
|NEM||43.63 (+0.38)||NEMKI||06 NOV 45.0 (24)||1.00||NEMKJ||06 NOV 50.0 (24)||0.15||20.5|
Several positions were returned with maximum returns ranging from 1% to 31.6% (24 days). As long as the price of the NEM stock is below the short strike option price on options expiration day on November 17, 2006, the position will be fully profitable.
PowerOptions provides Internet based tools for analyzing stock options with specific search criteria and for finding potentially lucrative option income. For those seeking to execute a bear call credits spreads strategy for their personal portfolios, PowerOptions provides an Internet based search engine for finding potentially lucrative income producing covered call stock options positions.
[tags] bear call credit spreads, option income, options trading, poweroptions, stock options [/tags]