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Royal Gold (RGLD) - Largest public Gold royalty co.

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Hi guys forgive my ignorance - what does GIP stand for in this context

 

 

Golden Inflection Point -- A chart signal. Refer to Dr Bubbs pinned thread on GIP's in the members forum.

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Very Nice move on RGLD today!

 

Last [Tick] 32.77[ + ]

Change +$1.40 / % Change 4.46%

Open 31.60

Volume 202,841

 

And that's strong volume too

 

Here's hoping RGLD again proves to be a bellwether for the CDNX

 

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My Jan '10 call LEAPs are nicely in profit. Now I have a trader psychology problem because I bought the LEAPs to hold through this year and perhaps 2009 in expectation of $1500 gold, but these short-term spikes are juicy and I'm tempted to trade them. Does anyone else hold these (or any other) LEAPs? If so, what's your strategy? Perhaps I should build a "hands-off" core position and have the discipline to trade around it without touching it.

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My Jan '10 call LEAPs are nicely in profit...

 

The spreads on LEAPS are bigger, so I tend to sit with my Leap positions.

I will usually but about half my position in 3-6month (or shorter) maturities, and trade around those,

rather than the LEAPs.

 

If you have a big position, and it is only in the Leaps, you might consider trading 25% or 50% of it.

The objective might be to trade around, like this:

 

Buy $25c for X

Sell $25c for Xplus

Buy $27.50 call for Xplus-$2.5

 

By doing this, you have "reset" your strike $2.5 higher, but still have the same breakeven

point, and taken $2.50 for your pocket

 

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My Jan '10 call LEAPs are nicely in profit. Now I have a trader psychology problem because I bought the LEAPs to hold through this year and perhaps 2009 in expectation of $1500 gold, but these short-term spikes are juicy and I'm tempted to trade them. Does anyone else hold these (or any other) LEAPs? If so, what's your strategy? Perhaps I should build a "hands-off" core position and have the discipline to trade around it without touching it.

 

Whats a LEAP?

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Whats a LEAP?

 

Long-term Equity Anticipation Plan which is a big mouthful to describe something very simple. LEAPs are just options that happen to have expiry dates that are a good bit further off than ordinary options. If you look at the available options for RGLD (http://finance.yahoo.com/q/op?s=RGLD) you'll see that you can get options with these expiries: Apr 08 | May 08 | Jul 08 | Oct 08 | Jan 09 | Jan 10. The Jan 2009 and Jan 2010 are LEAPs. Of course if you hold a LEAP long enough it stops being long-term. The US exchanges change the ticker symbols when a LEAP is deemed to have become an ordinary option (I don't know why - seems a bit unnecessary). I don't know if we have LEAPs in the UK - I've never traded options on LIFFE.

 

Anyway, the point about buying an in-the-money (call) LEAP is that if you can grab it with a sufficiently low premium then you own something whose price changes will closely track those of the underlying share but which will have cost you much less than buying the shares themselves. That's leverage.

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The spreads on LEAPS are bigger, so I tend to sit with my Leap positions.

I will usually but about half my position in 3-6month (or shorter) maturities, and trade around those,

rather than the LEAPs.

 

If you have a big position, and it is only in the Leaps, you might consider trading 25% or 50% of it.

The objective might be to trade around, like this:

 

Buy $25c for X

Sell $25c for Xplus

Buy $27.50 call for Xplus-$2.5

 

By doing this, you have "reset" your strike $2.5 higher, but still have the same breakeven

point, and taken $2.50 for your pocket

 

Thanks - I can see this is a good way of looking at it. Now I just have to nail the trades...

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Anyway, the point about buying an in-the-money (call) LEAP is that if you can grab it with a sufficiently low premium then you own something whose price changes will closely track those of the underlying share but which will have cost you much less than buying the shares themselves. That's leverage.

 

I should add that an advantage of LEAPs over ordinary options is that the premium (or time-value) portion of the price you pay for them tends to drop in value only very slowly (google "Black-Scholes equation" if you want to know why).

 

Chazza - does this make sense to you? If you're not at all familiar with options then you'll need to start with first principles. We can take it to the options or beginners section if necessary. I think options (including LEAPs) can be a terrific way of investing if managed properly and after someone explained it all to me I'm glad to get some karma points by paying it forward.

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I should add that an advantage of LEAPs over ordinary options is that the premium (or time-value) portion of the price you pay for them tends to drop in value only very slowly (google "Black-Scholes equation" if you want to know why).

 

At the money options are priced at the square root of Time.

 

Thus, all other variables held constant, if (for example) you hold a one year option for three weeks, and the price

of RGLD goes sideways, it will lose very little value. But if you hold a one month ATM option for three weeks, and RGLD

is unchanged, it can be expected to lose half of its value.

 

SQRT (4) : 2

SQRT (1) : 1, and 1 is half of 2 : -50% loss

 

while:

SQRT (52) : xx

SQRT (49) : yy, and ... (has someone got a SQRT function?)

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RGLD's been looking strong ever since that dividend announcement, like it wanted to move higher in spite of the gold price. Now gold appears to be moving back upwards I'm optimistic of a $40+ target. Shame my holding isn't as big now as it was before the correction. :rolleyes:

 

Silver Wheaton (SLW) did even better, up almost 6%!

 

 

Copied this from the main board. The only thing I would add is that the shorters have traditionally been in control at this level and it will be interesting to see whether that continues this time. If it does then I'd say this is a very bad entry point for those hoping to get in on this share. Probably best to wait a few days and see what happens after the next price pullback.

 

I don't know about anyone else but the chart just seems a mess at the moment and we could go either way, my gut feeling says up, but a share with such a large short position can throw up all kinds of surprises.

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Looks like gold pulled the rug from under RGLD yet again. I like Royal Gold here, but only short term as I think gold has further to fall from our current $850 level. I think a good long term buy point would be below $26, which I think is now a distinct possibility.

 

Silver Wheaton is the same, good play for a short term bounce, but it could fall much further if gold falls towards the $835 level and silver follows suit.

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I notice that Royal Gold is behaving well today:

RGLD : $28.47 Change: +0.83 Open:

Volume: 69,318 // Percent Change: +3.00%

 

I added some $25 calls earlier this week

 

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I added some $25 calls earlier this week

 

Some of you may have spotted the BUY opportunity on the Weekly chart

 

This is one of the better ones- especially if we get a surge now on rising volume

 

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Nice move UP in RGLD yesterday, with decent volume

bigso3.gif

 

Now we need to see RGLD punch through $30 with rising volume. Fingers crossed.

 

My latest trade in the stock was buying more RGLD calls:

 

MJQGE - CALL (MJQ) ROYAL GOLD INC JUL 25 (100 SHS) 07/19/2008

05/05/2008 25.0000 $3.61 $9,026.75

 

This lowered my average price, and my July position is now in the money.

There may be some good money to be made, if RGLD can punch through that $30 level.

 

I will be aiming to sell these calls at a profit in coming weeks, and maybe roll into the

Sept.$25, $27.50, or $30.00 strikes

 

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Royal Gold Reports Record Revenues and Free Cash Flow* in Third Quarter of Fiscal 2008

 

DENVER, MAY 1 /PRNewswire-FirstCall/ -- ROYAL GOLD, INC. (Nasdaq: RGLD; TSX: RGL), the leading precious metals royalty company, today announced fiscal third quarter 2008 royalty revenue of $19.5 million compared with royalty revenue of $11.2 million for the third fiscal quarter of 2007. Net income for the period was $7.4 million compared with net income of $3.4 million for the third quarter of fiscal 2007. Net income available to common stockholders for the period was reduced by payment of preferred dividends and a non-cash preferred share conversion adjustment totaling $3.6 million or $0.12 per basic share. This resulted in net income available to common stockholders for the period of $3.8 million or $0.12 per basic share, compared to $3.4 million, or $0.14 per basic share for the third quarter of fiscal 2007.

 

During the quarter ended March 31, 2008, the Company converted all of its 7.25% mandatory convertible preferred stock into 3.9 million shares of common stock. There will be no additional financial adjustments relating to the preferred shares.

 

Higher revenues for the quarter were largely driven by increased production at Leeville and the Pipeline Mining Complex, and new production from Taparko, Williams, Don Mario, El Limon, and El Chanate, in addition to higher year-over-year metal prices. For the quarter, we received about 80% of our revenue from precious metals.

Royalty revenue for the nine-month period ended March 31, 2008, was $47.7 million compared with $34.0 million for the comparable period ended March 31, 2007. Net income for the nine-month period was $18.2 million compared with net income of $14.0 million for the period ended March 31, 2007. Net income available to common stockholders for the period was reduced by payment of preferred dividends and a non-cash preferred share conversion adjustment totaling $4.8 million, or $0.16 per basic share. This resulted in net income available to common stockholders for the period of $13.5 million, or $0.45 per basic share, compared to $14.0 million per basic share for the nine-month period ended March 31, 2007.

 

Free cash flow for fiscal third quarter 2008 was approximately $16.3 million, totaling 83% of revenue. This compares to free cash flow for the third quarter of fiscal 2007 of approximately $8.3 million, or 74% of revenues. For the fiscal 2008 nine-month period, free cash flow was $37.5 million totaling 79% of revenue, compared with $26.6 million or 78% of revenue for the prior nine-month period.

 

As of March 31, 2008, the Company had a working capital surplus of approximately $191.0 million. Current assets were $199.9 million (including $183.8 million in cash), compared to current liabilities of $8.9 million resulting in a current ratio of 22 to 1.

 

"We are pleased that our financials are beginning to reflect the significant growth we have experienced in our royalty portfolio over the past 18 months," said Tony Jensen, President and CEO. "During the quarter, we saw strong production from most of our core producing royalty properties, along with an increasing ramp up at Taparko and a full quarter of production from the producing royalty properties we acquired in the Battle Mountain acquisition. This enhanced production, coupled with a higher average gold price, resulted in outstanding results for the quarter. We look forward to additional new royalty revenue sources this calendar year when the Dolores, Penasquito and Benso mines are scheduled to come on stream."

 

PROPERTY HIGHLIGHTS

Production and revenue for each of the Company's active royalty interests is shown in Table 1. For more detailed information about each of our royalty properties, please refer to the Company's most recent Annual Report on Form 10-K or our website, located at http://www.royalgold.com.

 

OTHER DEVELOPMENTS

Closing of the AngloGold Royalty Transaction

On February 22, 2008, the Company completed the acquisition of three royalties from AngloGold Ashanti (USA) Exploration Inc., a wholly-owned subsidiary of AngloGold Ashanti North America for $13.75 million. The acquisition included a 2.0% net smelter return ("NSR") royalty on the Marigold mine, located on the Battle Mountain-Eureka trend in Nevada, and operated by Goldcorp, Inc. This royalty should begin producing revenue in calendar 2010 when mining operations move onto the Company's royalty area. The other two royalties are in production and consist of a 2.0-4.0% sliding-scale NSR royalty and a 10.0% net profits interest ("NPI") royalty on the El Chanate mine, located in Sonora, Mexico, and operated by Capital Gold, Inc. The sliding-scale NSR royalty is capped at $17.0 million and the 10.0% NPI royalty is capped at $1.0 million.

 

Capital Structure

On March 10, 2008, the Company converted all of its 7.25% mandatory convertible preferred stock into 3.9 million shares of Royal Gold common stock. Also during the quarter, the Company repurchased approximately 197,000 shares of its common stock at a purchase price of approximately $5.5 million under a previously announced share repurchase program which ended on March 31, 2008.

 

/see: http://www.b2i.us/profiles/investor/ResLib...p;Category=1107

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Here are some charts that drive me towards buying Junior Gold shares

 

Gold-to-Oil : looking very cheap again (ie. Gold is cheap relative to oil)

001bd9.png

At only 7 barrels, Gold is cheap versus WTI Crude

 

CDNX-to-Gold : Looks like it is ready for a very serious rally from the bottom

aa0sj9.gif

(I liked yesterday's strong action in CDNX, while SPX and DJIA were down big.)

 

As I have said elsewhere, CDNX is usually a good proxy for Junior mining shares,

but some of the recent jump may have been driven by the junior Oil & Gas shares in CDNX

 

Have you notice the bullish move in RGLD, one of my favorites ... update

aa1jh9.gif

Stronger than Gold (GLD), stronger than gold majors (GDX)

 

Some would say "it's been a long wait", but along the way, I have traded in and out many times (buying below $30,

selling near $32), making money each time. The charts have helped enormously, but my confidence in RGLD,

and in the bull market in Gold have been an essential part of the successful trading in this stock.

(BTW, I am now sell some calls I bought when the stock was $28, and holding onto the longer term part of

my investment in RGLD calls and RGLD stock.)

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It's been quite good fun buying this below $29 and selling at around $31 over the past few months, but I have a feeling that this game is about to end. I think we'll dip a little further before heading back over $30 (again) but this time I'll be holding all of the way, when gold wakes up and starts to move upwards again, I think the long awaited push to $40 will begin for real.

 

 

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RGLD looks good to me. I think because it's the largest public gold mining company it will get a lot of exposure so is probably the best long term position for gold related investments. I'm going to take a position in RGLD equal to half my investment portfolio capital and invest the other half as a spread over some silver and gold junior miners (3 or 4).

 

I'm probably the smallest player in the forum capital wise and possibly the youngest but I'm confident from all the material I've read on this forum, in articles and heard on talkshows that the high liquidity of shares is the way to go and I can't see where I can go wrong with all the strong fundamentals. But it was DrBubb's insistence that mining shares will do much better than the spot price on the PM's that finally persuaded me, I'd be silly to ignore the advice of such a successful investor though I'm going to play it safe by going half in RGLD as opposed to having all my eggs in the juniors.

 

Hopefully I can proove that with a bit of common sense even someone my age can be a successful trader by following the good advice of the older and wiser ones :lol:

 

Sorry I'm really going off topic but whats the best website to trade with for holding positions in RGLD as well as some junior miners?

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RGLD looks good to me. I think because it's the largest public gold mining company

 

??

It is not.

It was once the largest public Royalty company, which is something very different.

Franco Nevada was recently refloated, I believe, so maybe that's not true any longer.

 

You can buy through any broker that trades in US stocks. I prefer to buy calls to buying the stock,

and bought some October $25 calls yesterday

 

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??

It is not.

 

My mistake I didn't realise about the royalty thing, I don't suppose you know a good online broker for US stocks?

 

Edit: Going to try Etrade, they seem good.

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My mistake I didn't realise about the royalty thing, I don't suppose you know a good online broker for US stocks?

 

Edit: Going to try Etrade, they seem good.

 

I use Fidelity, but i opened my account years ago in the US.

I hear that Etrade is good, but havent used them

 

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You can buy through any broker that trades in US stocks. I prefer to buy calls to buying the stock,

and bought some October $25 calls yesterday

 

RGLD up to $30.96

 

I paid $5.90 for those Oct $25 calls,

and today I sold some Jun.$25 RGLD calls at $6.00,

effectively rolling my position forward at no cost. Its nice to carry a position worth $31 per share,

with only $6 per share investment

 

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I hear that Etrade is good, but havent used them

 

Etrade and Fidelity have US and UK sites, the UK ones only let you invest in the LSE listed stocks as far as I can tell whereas the US ones most likely let you invest in AMEX and TSX listed stocks. However you have to be a US citizen to use the US sites.

 

This is what it says on the websites so I'm finding it difficult to find a site that will let me trade on the exchanges I want as the two latter ones are the ones with the juniors on. I'd love for someone to prove me wrong as I'd like to believe I could buy juniors on the UK sites but somehow I don't think it's possible.

 

There is one site that may be coming to my rescue, It's called Zecco and I found it as it happens to be the cheapest one out there yet also seemingly the only US one that allows international customers. I'll have to send off a signed contract and copy of my passport before I can join them unfortunately. Can anyone confirm my experiences regarding these stock exchange limitations or am I just out of the loop?

 

Edit: Noticed on other threads people are recommending PennTrade it seems expensive but it's UK based so I'll have a look into it and see if it has what I'm after.

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Etrade and Fidelity have US and UK sites, the UK ones only let you invest in the LSE listed stocks as far as I can tell whereas the US ones most likely let you invest in AMEX and TSX listed stocks. However you have to be a US citizen to use the US sites.

 

This is what it says on the websites so I'm finding it difficult to find a site that will let me trade on the exchanges I want as the two latter ones are the ones with the juniors on. I'd love for someone to prove me wrong as I'd like to believe I could buy juniors on the UK sites but somehow I don't think it's possible.

 

There is one site that may be coming to my rescue, It's called Zecco and I found it as it happens to be the cheapest one out there yet also seemingly the only US one that allows international customers. I'll have to send off a signed contract and copy of my passport before I can join them unfortunately. Can anyone confirm my experiences regarding these stock exchange limitations or am I just out of the loop?

 

Edit: Noticed on other threads people are recommending PennTrade it seems expensive but it's UK based so I'll have a look into it and see if it has what I'm after.

 

 

Note that Penn Trade are not UK based but US-based (in Idaho, Coeur d'Alene). However they accept accounts from international investors and they give access to OTC stocks which is what I was after. I just opened an account with them but still have to transfer funds. I use Internaxx otherwise for "standard" US, Canada stocks (including TSX, AMEX, etc.).

Look at this post where brokers are discussed more in detail here

 

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