First Trade On New Program

Began a new trade today using the new system. Long 5 calls of Hecla Mining (symbol: HL). Exercise price $2.50 per share. Stock currently trading around $5.15. Option price was $2.65 per contract so ($2.65*100*5)= $1325 position / $10,700 capital = 12.3% portfolio size. Lets see how it fits into the system:



Requirement 1: Stop loss rule. My leverage is 1.94. So if I multiple that times 10% - I must exit trade as a loss at 19.4% decrease in the position price from my entry point - or $2.14 per contract.

Requirement 2: Winning rule - would have to sell at least 2 contracts if the position hit $5.30 per contract.

Requirement 3: Position size at 12.3% of portfolio is less than 20% requirement for portfolio.

All system requirements are met and we can proceed with position. Lets make sure that I follow through on requirements 2 and most IMPORTANTLY - #1. :)

Rationale for trade and a little on Hecla - Hecla is a very speculative junior gold mining stock. The stock was ranked in Morningstar's recent announcement as one of the four WORST gold stocks no one should invest in. I am taking the other side on this one. I think the company has some issues - re: major gold mine it owns in Venezuela being a big one. Still - it has exposure to both gold and silver and I like the chart. Hopefully any corrections that are coming again in the metals will not be too strong. I see gold going to $750 an ounce by the end of 2006. This is even into the face of the interest rate hikes which is pretty astounding in and of itself.

Additional notes - speaking of beautiful charts / trade setups - here is a picture of the recent action in PDLI. I have been looking at some slightly in the money call options on this one - as it looks like it could make a major move soon:


Looking at above chart - it looks like stock has been basing in range betwen 26 and 32 for the past 6 months. It has been trying recently to break through that 32 area. If it does - I think the stock can go much higher and I may ditch the gold position to chase.

Here are some of the May 2006 call options. I was thinking of the $30 or $25 strike price. Offers a really nice leverage and risk reward ratio apparently:


Great to be back in the game again. More updates coming later this week and following week. It is still too early to drop the entire real estate game plan but that will be coming in due time as well.

Best regards,

BG