Market Curiosity: Exploring Markets And Systems

April 14, 2011

Long SLW June 47 calls at 2.30 and general silver update +3%, -48%

Filed under: +0 to +5%, -25 to -49%, Long Calls, Mistakes — Tags: , , , — Jeff Fitzmyers @ 5:37 pm

I really wanted to wait until tomorrow’s option expiration. But Xiphos Trading’s sentiment summed up the situation:

In the precious metals almost everyone is PETRIFIED of the downside (me too!) but the upside risk perception seems to be unvalued to me.

Not only was the price of silver was holding strong and rising as stocks were nearing the close, but the silver correction was very, very shallow compared to other silver corrections and compared to gold, crude, stocks, etc. It’s just silly not to be long most of the time.

I chose not to buy any far out of the money calls. They are all very expensive and too stressful to hold. 47’s are enough leverage. Typically I would prefer 42’s or 43’s when price is at 43.

In this case I figure that if SLW gaps open and does not hold the gap, the options can be sold. If SLW opens weak, sell for a small loss.

My take on CDE -7% and PAAS about -8% today from the news of the Bolivian gov wanting Bolivian silver? Less supply the public can buy via stocks. People are saying that is silver is up so much today. If that was true, then why is gold up a fair amount too??

Look how popular silver is getting. This snap shot was taken near the COMEX close. I cheery picked it — it’s more a representation at the extreme end of things. But still, silver is a small market compared to gold. Supposedly 🙂

The big picture suggests to me that silver can rise quickly for at least a few more weeks. Using the ratio (4.75) of the lead in vs. the rise to about $50/oz from the first consolidation, this recent rise would go to about $70/oz.

References
+ If March 1980 silver is similar to the current price pattern, a time based stop loss can be rather tight

April 15: Sold at the open +3%. Will probably buy again if price rises above the open, or near the end of the session, or the 60 min CCI declines and makes a bottom. The point is to avoid a big dip. I am happy to buy back in at a higher price.

Back in at 2.55. Started trading above the open price, already had a over 2 million shares traded and it seemed like there were a lot of buyers.

April 18: Opps, that was expensive. Out at -48%. Should have sold when the nascent breakout failed on Friday. And another clue was Friday closed low in the daily range. I choose to get out completely rather than wait and see if price recovers — after all, this is a buy zone. But it is more important for me to get centered again and sit with what caused the mistake.

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