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Tuesday, December 9, 2014

Continuation of Covered Calls Position in Agnico Eagle Mines Ltd.

Today, the covered calls position in Agnico Eagle Mines Ltd. (ticker symbol AEM) was continued by selling three Dec2014 $27.50 strike price Call options.  The transactions to date for this AEM position and two possible resulting return-on-investment results are as follows:

1.  Agnico Eagle Mines Ltd. (AEM) -- Continuation
The transactions are as follows:
09/24/2014 Sold 3 Oct2014 $30.00 Puts @ $1.10
Note: The price of Agnico Eagle was $30.03 when this transaction was executed.
10/17/2014 3 Oct2014 $30.00 Puts expired
Note: the price of AEM was $28.72 when these Puts expired
10/20/2014 Sold 3 Nov2014 $30.00 Calls @ $1.75
Note: the price of AEM was $29.55 when these options were sold.
11/21/2014 3 Nov2014 Call options expired
Note: the price of AEM was $26.64 today upon Nov2014 options expiration
12/09/2014 Sold 3 AEM Dec2014 $27.50 Call options @ $.35
Note: the price of AEM was $25.52 when these 3 Call options were sold.

Two possible overall performance results (including commissions) for this Agnico Eagle Mines transaction would be as follows:
100% Cash-Secured Cost Basis: $9,000.00 = $30.00*300
Note: the price of AEM was $30.03 when these Put options were sold.

Net Profit:
(a) Options Income: +$911.40
= ($1.10+$1.75+$.35)*300 shares - 3*$11.20 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If AEM close at current market price of $25.52 at Dec2014 expiration): -$1,344.00
= ($25.52-$30.00)*300 shares; OR
(c) Capital Appreciation (If AEM close above $27.50 at Dec2014 expiration): -$750.00
= ($27.50-$30.00)*300 shares

1.  Total Net Profit (If AEM closes at current market price of $25.52 at Dec2014 options expiration): -$432.60 
= (+$911.40 +$0.00 -$1,344.00); OR
2. Total Net Profit (If AEM is above $27.50 strike price at Dec2014 options expiration): +$161.40 
= (+$911.40 +$0.00 -$750.00)

1. Absolute Return (If AEM is at $25.52 current market price at Dec2014 options expiration and Call options thus expire worthless):  -4.8%
= -$432.60/$9,000.00
Annualized Return (If AEM is unchanged at $25.52 at Dec2014 expiration): -20.2%
= (-$432.60/$9,000.00)*(365/87 days); OR
2. Absolute Return (If AEM is above $27.50 strike price at Dec2014 options expiration and Call options are assigned): +1.8%
= +$161.40/$9,000.00
Annualized Return (If AEM is above $27.50 at Dec2014 expiration): +7.5%
= (+$161.40/$9,000.00)*(365/87 days)