UPDATE APR 25, 2011 @ 10:22am: Stock has given back all of the 2.5% gap from the opening and now the stock is actually down almost 1%…..If this sort if trade still interests you be sure to adjust your strikes…..as a note to readers I put a stock reference next to the trade, please look at this when evaluating current option prices and stikes…BUT be careful pressing a short term move like this, if you havn’t done it yet you might look to wait for a bounce to put this on.
ORIGINAL POST:
Silver is making all time highs this morning, and the SLV is up 2.5% on opening….enough is enough.
-you’d have to be crazy to short the ETF, but look to make very short term bearish bet through put spreads.
-stock is moving around a bit and mindful of the risk reward relationship…i am looking for a 3-4% move in 5 trading days to risk .35 to make .65, but you do this when you have a relatively strong feeling that the stock/etf could reverse, or retrace a small amount of the massive move it has had over the last couple weeks.
TRADE: SLV (stock ref 46.80) BUY THE APR29 weekly 46/45 Put Spread for ~.35
-Buy SLV APR29 weekly 46 Put for .95 and
-Sell SLV APR29 weekly 45 Put at .60
Break-Even On APR29 Weekly Expiration:
Upside: stock above 46 lose .35 premium
Downside: stock btwn 46 and 45.65 lose up to .35, stock btwn 45.65 and 45 can make up to .65, stock below 45 make .65
RISK WHAT YOU ARE WILLING TO LOSE, DUE TO THE SHORT TIME HORIZON, THIS PREMIUM WILL EVAPORATE IF THE ETF DOES NOT REVERSE SOON.