Riding the Gold Rush with KGC Earnings

Most investors freeze when earnings approach, too scared to pull the trigger or too eager to gamble. What if you could use that earnings volatility to get paid while managing your risk?

That's exactly what we're doing with Kinross Gold Corp (KGC), a gold mining proxy, with earnings one day away and gold riding a year-long trend.

TL;DR

• Sell cash secured puts to collect premium and reduce the cost basis of our LEAP calls, giving us immediate exposure while getting paid to wait for assignment.
• Buy protective puts for short-term downside insurance through the earnings event, allowing us to sell into strength if things drop hard.
• Buy LEAP calls for leveraged long-term exposure to gold with a clear understanding of intrinsic vs. extrinsic value.
• Manage post-earnings: sell more puts if we stay above strikes (collect more premium) or switch to covered calls if assigned (continue reducing cost basis).
• Finding Opportunity The strategy converts earnings volatility into opportunity, not panic.

Why KGC Right Now?

Gold has been a solid performer all year, and the trend looks strong. But buying shares outright at $33.50 means tying up capital with no income and no leverage.

Instead, we're using KGC as our gold proxy and structuring a trade that gives us three things:

1. Immediate exposure through LEAP calls.
2. Premium income from short puts to lower our cost basis.
3. Downside protection through earnings with a long put hedge.

Earnings hit Feb 18, 2026, one day after we enter. That's typically a recipe for chaos, but we're turning that volatility into our advantage.

The Trade Setup: Breaking Down Each Piece

Here's the full position setup on Feb 17, 2026:

Stock Price: $33.50

Short-term protection and income (expiring Feb 20, 2026):

• Sell 2 contracts Feb 32 Puts @ $0.45/share = Collect $90 premium ($0.45 × 200 shares)
• Buy 1 contract Feb 30 Put @ $0.15/share = Pay $15 ($0.15 × 100 shares)
• Net credit from puts: $75

Long-term bullish position (expiring Jan 2027):

• Buy 1 contract Jan 2027 $25 Call @ $11.40/share = Pay $1,140

Total Cash Outlay

• LEAP Call cost: $1,140
• Net put credit: $75 (we collected this)
• Net cash invested: $1,065

NOTE: We're do have to commit $6,400 in reserve for potential put assignment (2 contracts × 100 shares × $32 strike) for the short term.

Understanding the LEAP Call: Intrinsic vs. Extrinsic Value

The Jan 2027 $25 Call costs $11.40. Let's break that down to understand why this was attractive:

• Stock price: $33.50
• Strike price: $25
• Intrinsic value (what's already "in the money"): $33.50 - $25 = $8.50
• Extrinsic value (time premium we're paying): $11.40 - $8.50 = $2.90

Here's why this matters. The intrinsic value of $8.50 is the same risk as buying shares at the current price, it moves dollar-for-dollar with the stock. The $2.90 extrinsic value is the real premium we're paying for leverage and time.

By collecting premium from short puts, we're working to reduce that $2.90 extrinsic cost first, then eventually offset the intrinsic value over time. This keeps our effective cost basis dropping while maintaining leveraged exposure if KGC continues to go up in price.

The Protective Put: Short-Term Insurance

The Feb 30 Put we purchased at $0.15 is cheap insurance. It gives us the right to sell shares at $30 through expiration.

If KGC drops hard after earnings (say, to $28), that put could spike to $2+ in value. We can sell it, collect that gain (around $200+ on a $15 investment), and use the cash to further reduce our LEAP cost basis.

If we also get assigned shares below $32 from our short puts, we now own shares at a discount and we collected gains on the protective put. That's a controlled way to handle a worst-case scenario.

Post-Earnings: Two Paths Forward

Path 1: Stock Stays Above $32 (Bullish/Flat Outcome)

What happens:

• Both short puts expire worthless.
• We keep the $90 premium.
• The protective put expires worthless (we lose the $15, but that's the insurance cost).
• We net $75 in premium credits we received at the start of the trade.

Next move (week of Feb 27):

• Sell 1-2 more cash secured puts at the 20-delta level. the actual strike will depend on how KGC moved after earnings.
• Collect another round of cash in premium.
• Apply that premium to further reduce the LEAP call cost basis.

Updated cost basis after Week 1:

• Original net investment: $1,065
• Week 1 net premium collected: $75 (already factored)
• Week 2 premium (estimated): $80
• New effective cost basis on LEAP: $985 after week 2.

Over time, if we keep this rhythm weekly, we can bring the LEAP call cost down significantly, possibly even making it "free" if we collect enough premium over the coming months.

Path 2: Stock Drops Below $30 (Bearish Outcome)

What happens:

• We get assigned 200 shares at $32 = $6,400 outlay.
• The Feb 30 Put spikes in value. Let's say it's worth $1.15 at expiration.
• We sell the protective put for $115 ($1.15 × 100 shares).

Next move:

• Sell 2 covered calls at the $32 strike, expiring Feb 27.
• Collect around $60-80 in premium (estimated $0.30-0.40/share × 200 shares).
• Keep selling weekly calls at $32 until called away.

Cost basis update after Week 1 (bearish case):

• Shares purchased at assignment: $6,400 (200 shares @ $32)
• Premium collected from protective put sale: $115
• Premium from Week 1 short puts: $90 (we collected this upfront)
• Premium from Feb 27 covered calls: $70 (estimated)
• Net cost basis for 200 shares: $6,125 (or $30.63/share)

Meanwhile, the LEAP call cost remains at $1,065 (we're holding it for the long-term gold thesis).

Total capital deployed: $6,125 (shares) + $1,065 (LEAP) = $7,190

Each week we sell covered calls, we collect more premium and reduce the share cost basis further. Once called away at $32, we release $6,400 (200 × $32), allowing us to apply all the premiums we collected to this point, while keeping the LEAP for continued upside exposure, which will now have a significant lower cost.

The Big Picture

This isn't about predicting earnings. It's about structuring around uncertainty.

• Short puts: Get paid to potentially own shares at a price we're comfortable with.
• Protective put: Limits catastrophic loss and can be sold into strength if volatility spikes.
• LEAP call: Gives us leveraged exposure to the gold trend without needing to buy shares outright.

By layering these pieces, we're not gambling on a one-day event, we're using short-term earnings volatility to build a long-term position in a stock riding a solid macro trend, gold.

What Could Go Wrong?

1. Stock craters below $28 and keeps falling.

• Mitigation: The protective put limits immediate damage. We can close the entire position, take a controlled loss, and reassess. Our max downside on the short-term side is capped by the long put.

2. Volatility collapses after earnings, making future premiums tiny.

• Mitigation: We've already collected $75 net upfront. If premiums dry up, we can hold the LEAP and wait for the next volatility spike or simply ride the gold trend.

3. We get assigned shares and the stock keeps dropping, trapping capital.

• Mitigation: Covered calls at $32 allow us to collect income while waiting for a bounce. If the thesis breaks (gold trend reverses), we exit the shares and cut losses, keeping the LEAP or closing it as well.

4. The LEAP loses value if gold trends down long-term.

• Mitigation: We're reducing the LEAP's cost basis with collected premium. If the gold thesis breaks, we can exit early and preserve capital.

Next Steps

• Read How to Buy Stocks For Free as it will get into these concepts much deeper.
• Explore related strategies: How Options Enhance Value Investing and Cash Secured Puts Strategy.

Final Thoughts

Earnings don't have to be a coin flip. By structuring a position with short puts, protective puts, and LEAP calls, we're transforming volatility into a tool.

We get paid to wait, protect our downside, and maintain leveraged exposure to a strong macro trend. Whether KGC pops or drops after earnings, we have a plan.

That's not speculation, that's strategy.

Want to analyze companies like KGC before you trade? Check out the Wall St Yardie App to see fair value ranges, earnings data, and margin-of-safety calculations that make position sizing easier.

Keep the riddim steady, and let the market pay you while you wait.