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Author: [Investments] Topic: SLV
rick3117 send a private message View Space | Blog | Friends | Playbook |
rick3117
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#1
Posted: 10/23/2012 11:58:07 AM
Thinking about Grabbing some Dec. Calls.  

Somebody talk me out of betting the farm on SLV if it dips below $30.  


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#2
Posted: 10/23/2012 12:02:03 PM
Which calls and why only December?

If this market ever drops as it should, silver and gold will get cracked along with it.

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#3
Posted: 10/23/2012 12:12:39 PM
right now strike is 30.5 and the price is 1.52  

I am new at options, so you will have to bear with me.  

But the idea behind the trade is that I think commodities surge after the initial shock of the drop.  
QE infinity, 
Not to mention the money going into safe haven assets if Barry stays in office.  
I think there is going to be a serious flight to tangible assets.  

Do you think I should bump it out to apr or june?  


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#4
Posted: 10/23/2012 12:37:02 PM
Yes.

I think you need more time and consider adding safety by going into the money. I first looked at Aprils then went to Julys.

If you are wanting to purely gamble and are willing to risk 100% of the premium then you might consider December..if you are wanting a higher level of safety and chance at success then you go deeper in the money and further out in time.

So lets look at value and the July options.

Currently the 30s are trading for 3.50 or so, and that means you have about 70 or 80 cents in the money value and another 2.70 to 2.80 of fluff, premium which is nothing but time premium and at the money premium for market makers to take from you.

If you go into the money a few dollars and consider this more of an investment and not a hedge or speculation, lets look at the 26 options. They are selling for 6 ish per contract..6.05 or 6.10 or close..so of that there is 4.70-4.80 of intrinsic value, in the money value and only 1.25 to 1.30 of time value and fluff.

So on a percentage basis, the at the money option has 300% fluff/time value versus intrinsic value, while the 26 option has a much lower sub 30% fluff premium. AND if SLV drops nearer to that price, the contract will start adding more fluff value and your drop will be less on a percentage basis versus the 30s.

So you have to figure out what you want to do, is it a gamble or is it more of a safer bet?

I used to do options like 12-13 yrs ago and at first I was ALL gamble, taking risks and going out of the money all the time..then as I started getting smarter I would go more in the money and try to add some safety. Either way, most options expire worthless and the winner is always the market maker.

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#5
Posted: 10/23/2012 12:54:32 PM
This is a pure gamble.  
I think I might take your advice and get some padding time in there. 

I think that a fair price for SLV is around $34.  

I also think that Obama is winning another term.  I think there is going to be a rush to precious metal.  I think that the gold/silver bugs are going to freak right out when Obama gets a second term.  

I think that a longer timeframe is not a bad idea, but because of the speculative nature of this, I really do not want to drop much on making it safer.  It is what it is.  

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