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Top Trades for Wed, 25 Jan 2017 11:03 – ABX

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Top Trades for Wed, 25 Jan 2017 11:03 – ABX
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ABX/Selozi – One of my all-time favorite stocks.  They don't need to produce more if they are increasing the spread and they sold off a lot of less-productive mines so natural that total production will be down, but not too much and the margins are now huge!   They are fairly priced at $17 with 0.80 earnings per share – it's just a great stock to have if gold does take off as they are highly levered and, if gold goes down, you can ride it out and accumulate more. 

As a starter play on ABX, I like:

  • Sell 5 ABX 2019 $15 puts for $2.60 ($1,300) 
  • Buy 10 ABX 2019 $15 calls for $5.70 ($5,700)
  • Sell 10 ABX 2019 $22 calls for $3 ($3,000) 

That's net $1,400 on the $7,000 potential spread for an upside of $5,600 (400%) if ABX hits $22 into Jan, 2019.  Worst-case is you own 500 shares at net $16.40 ($8,200) but that's not a loss, that's just the entry cost.  ToS says net $1,500 margin, so it's an efficient trade as well.