In 2013 we have held a bearish view on gold, silver, and their mining companies. Some of the trades made on that view have yielded triple digit returns, including a position on HL puts that returned 212.50%. During April we made 135% being short junior mining stocks as gold collapsed, and have now added another trade to our string of winners with an outright short position on Coeur d'Alene.
Mining stocks have significantly underperformed gold and silver in recent years, and within this sector there are some stocks that show particular weakness. We identified Coeur d'Alene as being significantly overvalued, and therefore highly vulnerable to a fall in silver prices. With this in mind we chose to take a short position on May 28th, signalling to our subscribers to short sell the stock at $13.55.
We chose to short sell the stock, rather than buy puts, as this strategy was without a time premium component, this allowed us hold the position through small rallies or sideways movement in prices. The strategy of avoiding positions with negative theta paid off for us as the week after we shorted CDE it rose to almost $15 a share; a move that would have wiped potential profits off any puts that we would have chosen as an alternative. Following the rally we waited for prices to settle, once they had we increased our position so that a total 15% of our portfolio was allocated to Coeur d'Alene shorts; signalling to sell CDE shares at $14.55 on June 10th.
The Fed meeting in mid June and the talk of tapering lead to a severe selloff in both precious metals and their miners; needless to say the overvalued Coeur d'Alene fell sharply. However, when the stock did not fall the next day we bought back our short positions, making profits of 11.29% and 14.45% in less than a month.
As well as our short position on Coeur d'Alene we held a short on another company that we believed to be over-valued, Hecla Mining, which yielded 31.14%. We also opened an overall short position on gold via DZZ, one that made us profits of 25.78%
All 20 of our closed trades this year have been at a profit, which have brought our year to date return on closed trades up to 55.58%. Our model portfolio has returned a total of 727.54% since its inception nearly 4 years ago, and of our 133 trades 87.97% have been profitable. We are currently making considerable gains from the decline in gold prices and we have an annualised return of 71.76%. If you want to find out how what trades that we will be making next then all you have to do is sign up via the buttons below.
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