SLV is down 11.5% today and almost 30% in a week……Last week we took a quick look at the name (see below) asking if the move to the high 40s was a blow off top……Made a little money on a quick near term short play.
Now I want to take the other side playing for a possible 30% retracement of the downward move. This thing could be dead for a while, but it’s so volatile it could make a quick upward move at any moment. Define your Risk. Don’t get long this thing. Play for any type of bounce and retracement with a defined amount of money you are willing to lose. This is a lotto ticket trade. If it does bounce you need to get out of it quickly, hopefully with a tidy profit
NEW TRADE: BUY THE MAY13 WKLY 37/38/39 Call ButterFly for ~.12
-Buy 1 May13 wkly 37 call for .80
-Sell 2 May13 wkly 38 call at 1.10 (.55 each)
-Buy 1 May13 wkly 39 call for .43
Break-Even on May13 wkly Expiration:
-stock bwtn 37 and 37.12 lose up to .12,
-stock btwn 37.12 and 38 make up to .88,
-stock btwn 38 and 39 payout trails off
-stock 39 or higher lose .12
MAX RISK IS .12 PREMIUM THAT YOU PAID…..
DOWNSIDE: below 37 you lose the .12 premium that you paid.
UPDATE 3:53pm Apr 26th. I’m taking the whole thing off at or around .75. Not worth the risk for the other .25, Rationale is simple, the stock has been amazingly volatile over the last couple days and at this point the risk reward over the next 3 days seems out of balance to risk the profit that I made, plus my initial outlay to make another .25 or .30…
– As I said yesterday in my initial post I think that was a blow off top, check back over the next couple days as I will look to roll this gains into another bearish structure in the name.
SLV is down about 4.5% since yesterday morning when I suggested weekly put spreads…..I paid .35 for the SLV Apr29 wkly 46/45 Put Spread…..with the stock at 44.15 that spread can be sold at .70, doubling your money. I am taking half of my position off here as that rally back yesterday demonstrated just how volatile the stock is. Want to let the rest ride for now, but if it rallies back I will use a mental stop of .35 for the balance of the spread thus locking in gains for the trade.
Silver Making Blow-Off Top? Near Term Way To Play From Short Side
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.
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.