A Beautiful Gold Trade

A beautiful gold trade, with dividends and put and call optionsI recently made a hard decision to sell one of my gold stocks.  It was difficult because the stock was up 125% from where I bought it.  And we always want to hang on to winners.

But I was dissatisfied because it paid no dividends.  So I made the tough call.  And I sold the stock for a 125% profit.  Which, by the way, isn’t such a bad thing.

Then I went shopping for gold stocks that paid dividends.  This is not so easy to find because most gold mining stocks pay no dividend at all.

But I found one which I will share with you in a minute.

It’s a well established mining company that has been in business for 96 years.  And it owns roughly 100 million ounces of proven and probable gold reserves.  At $1650 an ounce, that is a whopping $165,000,000,000 in gold.  Some asset, yes?

There were other things I liked about this stock as well.  For starters, over 85% of it’s stock is held by institutional investors.  Let me say that another way.  The big guys own this one.  The professionals.  So they see something in it.

And the stock price was down to almost it’s 2009 lows, and at a low for the year.  So it was a bargain.  I’ll say that another way as well.  The stock price was only nine times earnings.  Most stocks today are well above that.

But here’s the really great point and that is that it pays a healthy 3.3% dividend.  That’s better than the average dividend of US stocks today.  And, a key point to me is that the company has been raising it’s dividend since 2009.  Actually longer than that, but with some flat periods – perhaps to be expected since commodities like gold can go in cycles.

What’s not to like?

So would you like to know the stock I picked?  It’s Newmont Mining (NEM) which operates in the United States, Australia, Peru, Indonesia, Ghana, New Zealand and Mexico.

Now I could have gone out and just bought the stock.  After all, the price and the reward seemed good.

Instead, I set up a trade where someone paid me $112, immediately, to buy it from them if it was a $1.50 a share cheaper.  Sweet.  And then I took part of that money to buy an option that would pay me if the stock went up instead of down.

And if it didn’t do anything, I still got to keep the $112.

Now there are only three things a stock can do.  It can go up, sideways or down.  And compared to just buying the stock outright, I make more money in all three circumstances.

I’ll tell you just how I set up this beautiful gold trade in my next post.

In the meantime, you might want to check out the stock.  You can find it at this Yahoo Finance link.  Note that the numbers will have changed somewhat since I wrote this post.

To your health and prosperity – John


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