All – I wrote about the Fortuna Silver Mines play here. I wanted to update you on where we were, what my positions are, and where I’m selling.
First – I noticed pre-market that the Dow was down 600 points overnight at one point. Gold and silver are pretty much unmoved. Then I looked at my metals list pre-market and saw FSM up 7%. Sometimes these are glitches on Yahoo. So – I decided to see if there was news. THERE WAS!!
What this means is the San Jose mine is blessed to continue operating for another 12 years!! Woohoooooooo!!
And what this means is I’m not homeless next week. In fact, it looks like I might have quite a nice pay day.
A fall from grace
At its recent high in November, it hit $5.52. What you then saw was news about the San Jose mine in Mexico closing. The stock was hit 32% in 2 days, or down about $1.80 on this news. This took the share price to $3.72. It recovered slightly up to $4, and then the price of gold and silver were slaughtered for what seemed to be 21 straight days and took it down to like $2.98 where I was margin called. Here was the FSM chart of the debacle.
In the pink oval is the take down. The trailing price since then was silver and gold getting hammered.
On FRIDAY 12/10, I felt a bottom had been in. I had tracked for SIXTEEN STRAIGHT MONTHS a pattern had formed with silver getting beaten down before options expiration, and THEN there was a strong recovery after. I played that recovery for 9 straight months now. The first 7 I had wins in ALL of them for moderate wins. I was usually playing call options on miners for about $1000 profit per month. In month 8, I stepped up my bet severely and WON $6,000 trade in November. I put up another $12,000 for December and the recovery….never happened. So I won in 8 out of 9 months – and this month that I did not win, price was smashed and I’m simply holding through until recovery.
What this signaled to me was the bottom was in – they had to continue to KEEP shorting to wring the wash cloth dry before they went long. This was not the beat down, pump, repeat.
This was a new tune. One where every stop had to be triggered, to a double bottom – EXACTLY in silver.
Now, I called a double bottom there and caught grief for it. By a lot of people. AND – it’s POSSIBLE – this is a dead cat bounce. But that 16 month pattern has now ended (mostly, could still see a bounce and beating this week).
I bring all of this up here because the price of silver tanked hard which then drubbed the shares more.
Fair market value
At $25 silver, FSM was at $5.52. It lost $1.80 from its price due to SJ. And, I feel the price of gold/silver moving down took another $.80 from it. The price recovered perhaps $.25 on the silver bounce from $21.44, but to me, it seems like we have $1.80 to make up.
With this, I’d take that $1.80 and tack it on to the $3.25 to get a ballpark of $4.90-$5.10 at THIS silver price for FMV. Today, pre-market, it’s up 8% at around $3.55. To me, this has about another $1.50 to make up to get back to where it was.
My GUESS is people like me today are about to sell blood to buy call options, expecting the price to rebound to $5. AT THE SAME TIME, we may expect a stronger silver/gold price over the coming weeks. ALSO at the same time, tax loss selling is over and my guess is many people will be buying into FSM in the droves now.
These three catalysts could take the stock to $6 inside 2-3 weeks. I think I’m going to start selling options around $5 in tranches. Some of these I bought when the stock was $3.25, and I’ll sell those first. Some I bought when the stock was $4, and I’ll sell them last.
Didn’t look so good. I lost another $2,000 or so on December calls – some I sold back a little early for a 14% haircut, others ran to zero. In my INITIAL writing, I mentioned the short term calls were SUPER risky, but worth holding. The news came literally DAYS after the options expiration on Friday. Sorry, but this cannot be a coincidence. Had this been announced on Weds of last week, that potentially would have added $10k to my portfolio. C’est la vie. I hedged that risk with longer duration options AND a ton of shares. IF all of the options had gone to zero and had I waited enough time, I felt I could have broken even with the share price regaining ground.
So, if you look at all of the red up above, no bueno. But that red is about to be a sea of green. Maybe not all today, but over the course of perhaps a week I feel that $1.80 will come back. IF silver and gold comply, AND tax loss selling is over, I think we will potentially see an overshoot by a bit. Perhaps some shorts get murdered. I will be buying $4 January calls until my hands bleed. I may stop by the blood bank to sell blood and knock off a liquor store to buy moar at this price.
To ME – FMV right now is around $5 and I expect an overshoot by $.50 to $1 depending on how silver and gold is doing in the next week.
My near term options I’m selling first. I think I can get $1.10 for these inside of a few days. But I have 50 of them. So at $.76 I may sell half for a 2x and let the rest run until mid January.
The June calls I am looking at a 2x on. This was part of my December short term plays, but I wrapped it up in here. I’ll take the double and call it a day.
The Jan 2023 calls I’ll be looking for a double to sell half, and then as gold/silver rise through the next few months – IF they do, I will be riding these hopefully to a 3-4x for the other half.
With the shares, I bought some lower, some higher. Ideally, I’d like to hold 2,000 shares for “free” long term. I’m probably going to sell these at a double, or close to it. This is what this potentially projects out to.
Now – all of this is about a $6-7 share price. A lot of this stuff I may sell half at a double. But let’s assume, for a second, that gold marches back up to $1900 in January and silver is back up at $28. What does the FSM share price look like?
This is potentially an $8-9 stock with those metals prices.
What I mean here then is if the price continues up, on my other half of shares I did not sell (free ones) I would be looking for having trailing stop losses on them. I don’t HAVE to sell at $7. Perhaps the shares I bought at $3.50 I sell at $7.
Anyway – the SHORT TERM TRADE – I’ll take my money and run. The Jan options? The shares? I can savor them and take my time with them as the shorter term trades free up my account more.