Trading

A few days ago I wrote a bit about taking a “trading” position in Hercules Silver, BIG.V. I got in at $0.77 and today BIG traded up to $0.91 before closing at $0.87. Sell now and take a righteous $0.10 a share profit?

I don’t think so. Largely because I am pretty sure we are at the start of a drilling speculation run which, skillfully managed, could put BIG over $1.00 in a few days and significantly higher as the drills are mobilized and start to turn. But how is it a “trading” position if I refuse to book a nearly 13% profit?

I’ve talked about the difference between trading and investing with investment pros, stock traders, CEOs and guys who have made a bunch of money in the market. There is no consensus at all as to what constitutes “trading”. Virtually every position a person takes will, eventually, be sold. But not every position is a trading position.

My own definition of a trading position is that it is a position I take on a short, less than 90 day, basis. Yup, completely arbitrary. But my criteria is that I have to see catalysts which will raise the share price on a time horizon of around three months.

As I mentioned, the catalyst I see for BIG is drilling related speculation. Which can’t start until the drills (there will likely be three diamond and one RC drill poking holes at the Hercules project) are deployed and turning.

The BIG CEO.CA Board is already ramping up with intelligent commentary as to where BIG should be drilling, how the RC drill can clear the overburden cheaply and quickly so that the diamond drill can dig right into the good stuff. GIFs of the Moon, Rockets and Leonardo DiCaprio in The Wolf of Wall Street have made their appearance as well as the dark charts with the intersecting orange lines and candles for daily price. The signal-to-noise ratio is about 1:1 but that is likely to change.

Were I “investing” in BIG this would signify nothing. I would have bought (as I have) based on the fact that Barrick has invested and it is likely that, over the next few years, BIG will drill up a significant #copper deposit and will also find a good deal of silver. Wearing my investors’ hat, my preferred exit event would be a buyout by a major at a price substantially above what I paid. Two or three times entry would make investor Currie a happy camper in the fullness of time.

My trading position has virtually nothing to do with the merits of the Hercules property, the Izee rhyolites, Barrick’s investment or the eventual size of the postulated copper porphyry. None of this will change in the next 90 days. What will change is the overall signal-to-noise ratio. As the drills turn the noise will increase while the signal stays the same.

“FOMO, YOLO, last chance to buy the dip,” will be smeared across the CEO.CA board and plenty of other venues. This will get louder as the shares rise in price. And it will be fed with all sorts of unfounded rumours as well as “bread crumbs” dropped by the CEO and assorted commentators hinting at what they are “seeing in the core” and, as importantly, what the timing of the results is looking like.

Armchair commodity speculators will wax wise on Robert Friedland’s prediction of the coming copper shortage. The current price of copper will be cited for a theoretical deposit which, at best, will see copper production in seven to ten years with a $300-500 million dollar CAPEX. But, in a proper drilling speculation frenzy, that is all grist for the mill.

There will be, of course, wonderful speculation as to where the share price will land if BIG manages to drill a hole as good, or better than, its Discovery hole reported October 10, 2023. After all, the SP went to $1.60 on that hole and Barrick’s buy-in.

Add to all this, there are stirrings of a rally in the overall junior market.

There is a lot of fun to be had and money to be made in a drilling speculation rally. A lot. But with a trading perspective, you have to be ready to leave the party early. Because, at the end of the speculation there is the “news”.

The effect of news, even very good news, is to turn the lights on in the bar. A trader wants to be home and tucked up in bed, profits booked, at closing time. The noisier the bar, the more profound the silence, when the lights come up. All of a sudden there are real numbers, real grades, and actual information as to the mineralization encountered. The noise dies away and the signal, good, bad or indifferent can be heard loud and clear.

The share price does not always Plop on news, but it often does. Trading well usually means missing the last 20-30% of the run. Which is fine because it also means missing any post news correction.

And, of course, the first set of BIG results will not be the last this drilling season. The bar will re-open, a new drilling speculation will begin to form. If I manage to trade it right, I will have dry powder to trade again.

[Disclaimer: I hold positions in BIG.V. I may buy or sell at any time. This is not investment advice. Do your own due diligence, do it hard. Call the CEO.]