Pre-1982 U.S. copper pennies, composed of 95% copper and 5% zinc, weigh 3.11 grams and have a melt value of approximately $0.0266, significantly exceeding their face value of $0.01. This discrepancy presents an arbitrage opportunity, allowing investors to acquire these coins at a 165.956% intrinsic value discount. Although melting these coins is prohibited by law, their copper content offers a tangible asset base. By accumulating these pennies and employing a covered call options strategy, investors can potentially achieve annual returns of around 26%, leveraging the coins' intrinsic value and market volatility.
This investment approach challenges the efficient market hypothesis by exploiting a measurable price discrepancy in a legal and innovative manner. It combines numismatic collection, physical metal accumulation, and derivatives trading, providing built-in risk mitigation through the coins' inherent face value floor and the potential for ongoing premium income generation, through covered calls on copper.