Anbat
Long

BTG- Write an OTM Covered Call

AMEX:BTG   B2GOLD CORP
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B2Gold Corp , together with its subsidiaries, engages in the exploration and development of mineral properties in Nicaragua, the Philippines, Namibia, Mali, Colombia, Burkina Faso, and Finland. It primarily explores for gold , silver , and copper deposits. The company's production properties include the La Libertad mine with an exploitation concession covering an area of 10,950 hectares and the El Limon mine covering an area of 12,000 hectares located in Nicaragua; the Masbate mine covering an area of approximately 15,209 hectares located in the Philippines; and the Otjikoto mine covering an area of 6,933.99 hectares located in Namibia. It also holds 90% interest in the Fekola project located in Mali; 81% interest in the Kiaka gold project located in Burkina Faso; and 49% joint venture interest in the Gramalote property located in Colombia, as well as an interest in the Quebradona property located in Colombia. The company was incorporated in 2006 and is headquartered in Vancouver, Canada.

Like all trading, you would need to make decision if this strategy is right for you. Out of the money covered calls is a covered call strategy where the moderately bullish investor sells out-of-the-money calls against a holding of the underlying shares. The OTM covered call is a popular strategy as the investor gets to collect premium while being able to enjoy capital gains (albeit limited) if the underlying stock rallies.

Limited Profit Potential
In addition to the premium received for writing the call, the OTM covered call strategy's profit also includes a paper gain if the underlying stock price rises, up to the strike price of the call option sold.

The formula for calculating maximum profit is given below:
Max Profit = Premium Received - Purchase Price of Underlying + Strike Price of Short Call - Commissions Paid
Max Profit Achieved When Price of Underlying >= Strike Price of Short Call
Unlimited Loss Potential
Potential losses for this strategy can be very large and occurs when the price of the underlying security falls. However, this risk is no different from that which the typical stock-owner is exposed to. In fact, the covered call writer's loss is cushioned slightly by the premiums received for writing the calls.

The formula for calculating loss is given below:
Maximum Loss = Unlimited
Loss Occurs When Price of Underlying < Purchase Price of Underlying - Premium Received
Loss = Purchase Price of Underlying - Price of Underlying - Max Profit + Commissions Paid

Break-even Point(s)
The underlier price at which break-even is achieved for the covered call (otm) position can be calculated using the following formula.
Break even Point = Purchase Price of Underlying - Premium Received
Comment: Just keeping update of this current covered call, once a week.
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