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drbubb

Beating Buy and Hold (thru disciplined speculation)

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What risk? I lose nothing. The number of ounces I have will be the same.

You may be losing wealth - and you are certainly losing opportunity

 

I am amazed that people here were warned of the Parabolic move in Silver, and we suggested getting out at $50 - and then the slide afterwards happened just as we had suggested.

 

Having seen that once, many here sat through a second parabolic move - this time in Gold. Again, PD and I called the top cloee to perfectly, and suggested taking some profits, or switching into calls if they wanted to stay long.

 

Now there has been a second big slide, and people are saying Buy & Hold is best, when they are surrounded by evidence it is not. Tear up your JS fanclub cards, and learn something from the experience you have just lived through twice.

 

Else, eventually you may find yourself like those who stayed long Gold right through the 1980 top, and its subsequent demise. Do you learn nothing?

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When trading precious metals...

 

My favorite moving average is 144 days - Have a look:

 

+ In Gold/GLD

 

+ In Silver/SLV : a break is big trouble !

 

I am watching PHYS also ... update

PHYS-vs-GLD.gif.jpg

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My belief is that it should be a bit of both. Gold as insurance policy. Imagining you have a, say, 10% hold that you keep forever, just in case me have a financial meltdown. If it does happen, according to the prophets, your 10% will be worth a hundred-fold (finger in the air estimation) its original value and you will be just as wealthy.

If it doesn't happen, you will be rich as well :)

 

Now, you may want to increase the proportions. But going "all in, forever" on gold to me sounds a bit .... risky, just as well. Because the chances of a financial meltdown which specifically places gold at the centre of the new order isn't 100%. I'm not even sure we can value it being 50%?

A better insurance policy has been:

Hold Gold and Silver until you see a parabolic move. Then sell: switching into in-the-money calls on GLD

or SLV after you see a parabolic move up. Then as it slides, carefully reinvest back into Gold and Silver as it gets cheap again. This is the simplified core of the Beating B&H strategy. And you have seen it work.

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A better insurance policy has been:

Hold Gold and Silver until you see a parabolic move. Then sell: switching into in-the-money calls on GLD

or SLV after you see a parabolic move up. Then as it slides, carefully reinvest back into Gold and Silver as it gets cheap again. This is the simplified core of the Beating B&H strategy. And you have seen it work.

 

Bubb,

 

I think this works most of the time, but this strategy made me sell 50% of my silver holdings last December and meant I only had 50% left wehn we made the move up to just under $50

 

The same strategy worked this time for gold as I sold half my gold portfolio just below the peak. However, this gold peak was just a common or garden peak in gold, not a massive blow off akin to what we saw in silver back in April.

 

Therefore, I think your strategy will work well most of the time, but I think you will miss out on fully exploiting the gargantuan moves that seem to happen every couple of years.

 

Mind you the buy and holders will miss out as well so I don't know how else to play this.

 

Any suggestions for someone like me who only trades the big peaks and troughs, but wants to avoid what happened to me in silver?

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A better insurance policy has been:

Hold Gold and Silver until you see a parabolic move. Then sell: switching into in-the-money calls on GLD

or SLV after you see a parabolic move up. Then as it slides, carefully reinvest back into Gold and Silver as it gets cheap again. This is the simplified core of the Beating B&H strategy. And you have seen it work.

 

Bubb,

 

I think this works most of the time, but this strategy made me sell 50% of my silver holdings last December and meant I only had 50% left wehn we made the move up to just under $50

 

The same strategy worked this time for gold as I sold half my gold portfolio just below the peak. However, this gold peak was just a common or garden peak in gold, not a massive blow off akin to what we saw in silver back in April.

 

Therefore, I think your strategy will work well most of the time, but I think you will miss out on fully exploiting the gargantuan moves that seem to happen every couple of years.

 

Mind you the buy and holders will miss out as well so I don't know how else to play this.

 

Any suggestions for someone like me who only trades the big peaks and troughs, but wants to avoid what happened to me in silver?

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A better insurance policy has been:

Hold Gold and Silver until you see a parabolic move. Then sell: switching into in-the-money calls on GLD

or SLV after you see a parabolic move up. Then as it slides, carefully reinvest back into Gold and Silver as it gets cheap again. This is the simplified core of the Beating B&H strategy. And you have seen it work.

 

Bubb,

 

I think this works most of the time, but this strategy made me sell 50% of my silver holdings last December and meant I only had 50% left wehn we made the move up to just under $50

 

The same strategy worked this time for gold as I sold half my gold portfolio just below the peak. However, this gold peak was just a common or garden peak in gold, not a massive blow off akin to what we saw in silver back in April.

 

Therefore, I think your strategy will work well most of the time, but I think you will miss out on fully exploiting the gargantuan moves that seem to happen every couple of years.

 

Mind you the buy and holders will miss out as well so I don't know how else to play this.

 

Any suggestions for someone like me who only trades the big peaks and troughs, but wants to avoid what happened to me in silver?

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Bubb,

 

I think this works most of the time, but this strategy made me sell 50% of my silver holdings last December and meant I only had 50% left wehn we made the move up to just under $50

 

The same strategy worked this time for gold as I sold half my gold portfolio just below the peak. However, this gold peak was just a common or garden peak in gold, not a massive blow off akin to what we saw in silver back in April.

 

Therefore, I think your strategy will work well most of the time, but I think you will miss out on fully exploiting the gargantuan moves that seem to happen every couple of years.

 

Mind you the buy and holders will miss out as well so I don't know how else to play this.

 

Any suggestions for someone like me who only trades the big peaks and troughs, but wants to avoid what happened to me in silver?

???

What do you mean: "this strategy" ?

???

What I am doing here is very disciplined.

When I sell large amounts of my Gold or Silver, or even deep in-the-money calls, I usually move quickly

to replace them with cheaper SLV calls which are less in the money. So if the price then runs up,

I will still capture most of that action.

 

In my own real trading, I am not so disciplined. But for purposes of this exercise, I have been doing that.

 

This is what is meant by the "10,000 Long", that matches the 10,000 oz. long in the Buy & Hold portfolio

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A 24% drop in the Price of Silver in a single week !

That has had some big impact on prices of all positions

===============

 

SLV--: $29.98 : $39.39 : $40.52 : $42.18 : $40.41 : $41.68 : $38.12 : $37.61 :

Change: -$9.41 : - $1.13 : - $1.66 : +$1.77 : -$1.27 : +$3.56 : +$0.51 : -$1.22 :

%Chg: -23.89% !

Silver : $31.08 : $40.67 : $41.43 : $43.26 : $41.72 : $42.93 : $39.07 : $38.33 :

Prem. : +$1.10 : +$1.38 : +$0.91 : +$1.08 : +$1.31 : +$1.25 : +$0.95 : +$0.72 :

ZSL-- : $19.34 : $12.11 : $11.51 : $10.70 : $11.68 : $11.33 : $13.62 : $14.33 :

$42-X : $22.66 : $29.89 : $30.49 : $31.30 : $30.32 : $30.67 : $28.38 : $27.67 :

ZX/slv : 75.58%: 75.88%: 75.25% : 74.21%: 75.03% : 73.58%: 74.45%: 73.57%:

====

DXY--- : $78.30 : $76.54 : $77.20 : $75.25 : $73.81 : $74.24 : $74.56 :

UUP---: $22.20 : $21.74 : $21.91 : $21.22 : $20.96 : $21.03 : $21.11 :

CRB--- : 301.87 : 329.55 : 334.24 : 338.06 : 335.25 : 329.47 : 326.53 :

DBA---: $30.13 :

Rsilver : : 9. ??? : : 9.161 : : 9.019 : : 9.389 : : 8.897 : : 9.392 : : 8.704 : :

===

Ja.$35c: $2.11 / $5.60 /

Ja.$25c: $6.72 / $7.95 /

Ja.$27c: 12.00 : 12.77 : 13.97 : 15.45 : 13.97 : 15.20 : 11.87 : 11.20 :

Oc.$30c: $2.30 : $9.50 : 10.72 : 12.27 : 10.70 : 11.95 : $8.62 : $8.00 :

Oc.$34c: $0.97 : $5.75 : $7.02 : $8.52 : $7.15 : $8.35 : $5.45 /$4.75 /

Oc.$38c: $0.41 : $2.70 : $3.95 / $3.98 /

Ja.$36c: $1.87 : $5.70 :

ATX.v--: $0.75 : $0.85 : $0.80 : $0.79 : $0.90 : $0.91 : $0.90 : $0.93 :

ZSL$11c: $8.50 / $1.73 /

DBA$30c $1.67 / $2.90 /

===

Trades this week:

BOT : SLV Jan.$35c at $5.60 x 2,000 (= - $11,200 : AP#1)

BOT: DBA.Jan.$30c : $2.90 x 2,000 (- $5,800 : AP#1)

BOT: ZSL. Oct.$11c : $1.73 x 3,000 (- $5,490 : AP#1)

SOLD: ZSL. Oct.$11c : $3.50 x 1,000 (+ $3,500 : AP#1)

BOT: SLV at $34.74 x 1,000 shares = (= -$34,740 : AP#1)

SOLD: ZSL. Oct.$11c : $3.90 x 1,000 (+ $3,900 : AP#1)

BOT: Physical Silver at $34.80 x 1,000 (= -$34,800 : AP#2)

BOT: SLV - Silver etf at $31.90 x 1,000 (= -$31,900 : AP#1)

SOLD: ZSL. Oct.$11c : $6.50 x 1,000 ( + $6,500 : AP#1)

BOT: SLV-Jan.$25c at $7.95 x 1,000 ( -$7,950 : AltP#1)

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OUTPERFORMANCE JUMPED, as Silver dropped almost -24% on the Week !

 

(Using calls & ZSL, I was partly protected from the drop.)

 

RECORD

(B&H Silver 10,000 oz.)

Record :: B&H Portf : Alt.Port #1 : Alt.Port #2 : Average : -Ratio- : -SLV- : -DXY- /--CRB-- real.SLV

 

01 July: --- $337.0 K : - $479.2K : - $465.2 K : $472.2K : 140.1% : $33.00 x74.36 / 3.3671 =# 7.288

08 July: --- $365.4 K : - $508.5K : - $498.1 K : $503.3K : 137.8% : $35.75 x75.08 / 3.4355 =# 7.813

15 July: --- $390.7 K : - $535.8K : - $532.8 K : $534.3K : 136.8% : $38.24 x75.13 / 3.4650 =# 8.291

22 July: --- $401.0 K : - $541.4K : - $539.8 K : $540.6K : 134.8% : $39.07 x74.14 / 3.4793 =# 8.325

29 July: --- $398.9 K : - $539.7K : - $537.1 K : $538.4K : 135.0% : $38.83 x73.75 / 3.4208 =# 8.371

05 Aug: --- $383.3 K : - $534.4K : - $538.9 K : $536.6K : 140.1% : $37.61 x74.54 / 3.2608 =# 8.597

12 Aug: --- $390.7 K : - $536.7K : - $541.9 K : $539.3K : 138.0% : $38.12 x74.56 / 3.2653 =# 8.704

19 Aug: --- $429.3 K : - $558.6K : - $570.4 K : $564.5K : 131.5% : $41.68 x74.24 / 3.2947 =# 9.392

26 Aug: --- $417.2 K : - $546.5K : - $558.1 K : $552.3K : 132.4% : $40.41 x73.81 / 3.3525 =# 8.897

02 Sep: --- $432.6 K : - $560.6K : - $572.8 K : $566.7K : 131.0% : $42.18 x75.25 / 3.3806 =# 9.389

09 Sep: --- $414.3 K : - $544.9K : - $557.2 K : $551.1K : 133.0% : $40.52 x77.20 / 3.3424 =# 9.019

16 Sep: --- $406.7 K : - $539.8K : - $552.5 K : $546.2K : 134.3% : $39.39 x76.64 / 3.2955 =# 9.161

23 Sep: --- $310.8 K : - $485.2K : - $479.3 K : $482.3K : 155.2% : $29.98 x78.30 / 3.0187 =# 7.776

Vs B&H: -- 100.0% - : - 156.11% : - 154.22% : + 155.17%

 

At 23 Sept., the average of the two Alt. Portfolios was $171,458 ahead of Buy&Hold.

 

Versus $153,343 ahead at 5 Aug., when Silver had fallen to $38.33.

 

You may notice / see spreadsheet : https://spreadsheets1.google.com/spreadsheet/pub?hl=en_US&hl=en_US&key=0Am5S2YdB2ZxYdC1KcWgxVVpqamJhQl9zRmt2aEhPaUE&single=true&gid=0&output=html

 

How I have an average 12,000 oz./SLV shares and options as a long position.

I recently took some profits on deep-in-the-money SLV.Jan.$27 calls, shifting into Oct.$34calls and

Oct.$38calls. When the Silver price fell sharply, those positions went out of the money, and so did

the Jan.$35calls that I purchased at the beginning of the week. This meant that I could "replace"

them with cheaper strike Calls and with Longs, and I have begun to do so.

 

If SLV hits my target of $27, then I shall move towards a bigger long position, so if Silver moves back

up, I can stay ahead of the B&H portfolio. The continued strong cash position will allow me to do so.

 

(In my own account I was far more aggressive. I was net Short Silver, and so cash a profit.

And moved to a small net Long position on Friday.)

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Bubb, I still can't read this thing. It's very confusing, and your link to the spreadsheet is protected.

 

 

 

A 24% drop in the Price of Silver in a single week !

That has had some big impact on prices of all positions

===============

 

SLV--: $29.98 : $39.39 : $40.52 : $42.18 : $40.41 : $41.68 : $38.12 : $37.61 :

Change: -$9.41 : - $1.13 : - $1.66 : +$1.77 : -$1.27 : +$3.56 : +$0.51 : -$1.22 :

%Chg: -23.89% !

Silver : $31.08 : $40.67 : $41.43 : $43.26 : $41.72 : $42.93 : $39.07 : $38.33 :

Prem. : +$1.10 : +$1.38 : +$0.91 : +$1.08 : +$1.31 : +$1.25 : +$0.95 : +$0.72 :

ZSL-- : $19.34 : $12.11 : $11.51 : $10.70 : $11.68 : $11.33 : $13.62 : $14.33 :

... etc

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I don't have time to reformat or explain that.

 

Try this link, for the now-revised Spreadsheet:

https://spreadsheets1.google.com/spreadsheet/pub?hl=en_US&hl=en_US&key=0Am5S2YdB2ZxYdC1KcWgxVVpqamJhQl9zRmt2aEhPaUE&single=true&gid=0&output=html

 

Please let me know if it does not work

 

SEE ALSO, the comments now added in post #409, above

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Link works in chrome, not in mozilla.

 

I'll try and figure it out in google docs.

 

Please check your yahoo email.

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Link works in chrome, not in mozilla.

I'll try and figure it out in google docs.

Please check your yahoo email.

Thanks for that info - That's how I view it: in Google Chrome.

 

It's late here, so I may not get to emails until tomorrow

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???

What do you mean: "this strategy" ?

???

What I am doing here is very disciplined.

When I sell large amounts of my Gold or Silver, or even deep in-the-money calls, I usually move quickly

to replace them with cheaper SLV calls which are less in the money. So if the price then runs up,

I will still capture most of that action.

 

In my own real trading, I am not so disciplined. But for purposes of this exercise, I have been doing that.

 

This is what is meant by the "10,000 Long", that matches the 10,000 oz. long in the Buy & Hold portfolio

ok, what i am doing is different, i am just selling 50% of my long positions when i get to a multiple of the 200dma that i consider overbought and then buying when we get down to the 200dma. It is profitable, but in December I dumped 50% of my silver at $30 as it hit my over bought indicator.

 

so when you sell your long positions, you are then buying less in the money calls in slv? Therefore you must have taken a beating on those calls when gold and silver bombed, even though you were out of your previous call? How much do you invest in the 2nd set of calls as a percentage of the first set of calls or long position?

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This shows one of my key tactics

 

so when you sell your long positions, you are then buying less in the money calls in slv?

Therefore you must have taken a beating on those calls when gold and silver bombed, even though you were out of your previous call? How much do you invest in the 2nd set of calls as a percentage of the first set of calls or long position?

Sure.

Exactly right. I cashed a very large amount of money in selling the deep in-the-money calls, and then replaced them with much cheaper just in-the-money calls. The profits I cashed are much bigger than the premium I spent. So when prices slide, I can buy back in at a lower price and I have plenty of cash in the bank.

 

As I posted at the time: (10 Sept. / post#362:)

I swap:

2,000 Jan.$27 calls (at $13.95), each portfolio into:

 

2,000 Oct.$38c ($3.98) in Alt.P#1: Net Cash in: $9.97

2,000 Oct.$34c ($7.00) in Alt.P#2: Net Cash in: $6.95

 

I WANTED the Silver price to fall, and fall far and quickly, so I could replace the $38 & $34 Calls with something at a lower strike. And if it fell quickly enough, the $38 & $34 calls may still have a little value.

 

I think I understand somehow. So, to "emulate" the equivalent of physical silver in SLV, you would need to immobilise, say, 7 times less funds?

 

I definitely need to read more on it, thanks for clarifying.

In this example, you pay a Call option premium which is 1/7 as much as you pay for to buy silver.

 

That is gearing. But it is also gearing without additional risk. If the Silver price drops, as it has, you can just throw away the option - and maybe buy Silver cheaper, which is what I am doing.

 

I anticipated some sort of drop in my strategy, as posted on Sept. 12th:

 

You may notice / see spreadsheet : https://spreadsheets1.google.com/spreadsheet/pub?hl=en_US&hl=en_US&key=0Am5S2YdB2ZxYdC1KcWgxVVpqamJhQl9zRmt2aEhPaUE&single=true&gid=0&output=html

 

How I have retained 10,000 oz./SLV shares as a long position (matching B&H),

but recently took some profits on deep-in-the-money SLV.Jan.$27 calls, shifting into Oct.$34calls and

Oct.$38calls. I also hold calls on ZSL. If Silver now drops sharply, I am somewhat shielded, and

I should be able to show some outperformance. But it Silver runs to the upside, the 10,000 Longs

will keep me in the game.

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More explanation...

 

You are completely missing the point of options if you only focus on the fact that they expire.

That's exactly right.

Insurance expires too. But you want it in place at times of extreme risk.

 

By the time a Call expires, I expect:

 

+ To replace it with cheaper Silver, or

+ Replace it with a Call option at a significantly lower strike price, or

+ I have been surprised and the Silver price ran up, and I am glad I hold a valuable call

 

If instead, the price moves sideways, I will lose the time value - but not the whole value if I have bought an in-the-money option

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Amazingly...

Orders to Buy 1,000 oz. of Silver at $27 for each Alternative Portfolio have been filled.

 

Where next? I am wondering

 

I may top-up, when the Low of the day is tested, using SLV or SLV-calls

 

It has been an impressive slide !

And some readers may recall I have been targeting the $27 level for a long time.

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As a former Series 4 SROP (senior registered options principle) at a brokerage firm I can tell you that the fact that options expire is critical to one's calculus.

 

Moreover, the suggestion offered by some on GEI that options should be embraced by mainstream investors is completely unfounded; and, as a registered representative at a brokerage you likely wouldn't be allowed to give this advice. Most people will not have consistent success with options.

 

 

http://optiongenius.com/blog/data-shows-that-75-or-more-of-options-expire-worthless/

 

I have showed data, you guys are just talking about ideas.

Carlton,

I am not "advising" anyone here. (! For advice, I would expect payment.)

I am merely demonstrating how options can be used in a smart and low risk way.

 

BTW,

I think it is important that anyone reading the Beat B&H thread that it has been my practice to limit my SLV Call purchases to amounts of Silver/SLV that I can afford to buy outright. In other words: in nearly all cases, I have enough cash sitting in the account to exercise the Calls option if I decide to do so.

 

(This should be bloody obvious to anyone who has really studied my trading there, but it may not have been noticed by those who occasionally just glance at my trades.)

 

I am using options primarily as a way to control price exposures (!), not to take on excessive and dangerous gearing. It would be a real mistake for someone who, for example, was comfortable investing $10,000 in silver - that's about 300 ounces at $33, or about 300 SLV Call contracts - to plow the whole amount into Call options. I am not trading that high-risk way at all.

 

If you wanted to buy SLV-Calls costing $5, an option (covering 100 shares) would cost $500, and theoretically you could buy 20 of them. That is not what I am doing or suggesting anyone else here do. In my method, the trader would buy 3x contracts costing $1500, and sit with $8,500 in cash, waiting to see if he wants to exercise the 3 contracts. And he should also check his option strike price, and see if the cash he holds is enough - if not, then risk control becomes even more critical.

 

Traded in the way I am using them, options are much less risky than putting the whole amount of available cash into calls. This is only one of several cautions I would want to make if I was intending to ADVISE people - which I am not - I want people to LEARN from my ideas, but to take full responsibility for their own trades.

 

Thanks for pushing me a bit to make this important point - in case it was not obvious to some here.

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Today's Rally, with SLV at $31.84

 

Allows me to sell and "clean up" so of the extra SLV calls, likely to expire worthless

 

SLV-Oct Prices

38 - $0.37 : sold 3xAP#1

34 - $1.15 : sold 2xAP#1 and 2xAP#2

 

Notice that:

SLV is trading way below the Strike, and these calls still have some value.

I have already "replaced" them with Lower Strike calls and/or Silver or SLV

 

I AM REALISING A HUGE LOSS.

But I do not mind, since I have replaced them with Cheaper silver, and they

are very likely to expire worthless if I do nothing/. I have improved the

overall Silver cost in the portfolio by "trading around" these calls.

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Mind you the buy and holders will miss out as well so I don't know how else to play this.

 

Any suggestions for someone like me who only trades the big peaks and troughs, but wants to avoid what happened to me in silver?

Here's a suggestion for you Learner, it has been working well for me over the last 3 years.

 

http://www.24knews.com/viewtopic.php?f=2&t=644

 

 

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Bubb, your call on the Gold shakeout was well timed.

 

How do you see the price action playing out in the short to mid term? I was surprised to see it fall below $1600, and Im wondering whether it might shakeout again soon. I still have no physical and am looking for an opportune time to take a position. Im afraid I dont yet understand options (they are on my reading list!)

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Bubb, your call on the Gold shakeout was well timed.

 

How do you see the price action playing out in the short to mid term? I was surprised to see it fall below $1600, and Im wondering whether it might shakeout again soon. I still have no physical and am looking for an opportune time to take a position. Im afraid I dont yet understand options (they are on my reading list!)

My current assessment is that there is a 70% chance Gold & Silver will fall back and test the recent lows,

and maybe go lower.

 

I took some small profits on yesterday's rally, and was ahead on that trade by the close.

 

I would am restructuring the Beating B&H portfolios, as you will see by week's end

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My current assessment is that there is a 70% chance Gold & Silver will fall back and test the recent lows,

and maybe go lower.

 

I took some small profits on yesterday's rally, and was ahead on that trade by the close.

 

I would am restructuring the Beating B&H portfolios, as you will see by week's end

 

I'm not saying this is going to happen, but if silver were to go into a bear market from here, and move into a slow decline, say 1% per week with low volatility from here on in, would that sort of scenario not be hard to trade using options? You're counting on big swings to make it work surely, would a low volatility market corrupt your strategy somewhat? Would you adapt it in any way if that situation arose?

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I'm not saying this is going to happen, but if silver were to go into a bear market from here, and move into a slow decline, say 1% per week with low volatility from here on in, would that sort of scenario not be hard to trade using options? You're counting on big swings to make it work surely, would a low volatility market corrupt your strategy somewhat? Would you adapt it in any way if that situation arose?

Yes. That could happen.

And if I see it developing, I would want to make some changes in how I trade.

Watch over time, and see how my trading evolves.

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Latest trade mentioned on a post on the Silver thread:

Unallocated paper PM's are subject to massive counter party risk, especially in the largest financial crisis the world has ever seen. I have no idea as to why you continue to ignore this fact, is it purely greed?[/size]

I think I have demonstrated to anyone's satisfaction that the PRICE RISK in Buy & Hold

has thus far been massively higher than the purely theoretical risk that you discuss.

 

Have you noticed that I have slowly been building up Physical Silver in these portfolios,

and before long I expect to be left with:

 

+ 10,000 oz. of Physical Silver (matching the Buy & Hold portfolio)

+ Some calls on SLV and other traded instruments

+ Plenty of cash

 

With that mix, I will never be at risk of falling so far that my portfolio will be as bad off as B&H.

 

By focussing on a theoretical risk, you have been blindsided by the price risk

=== ===

 

Today I have added:

 

SLV.Jan$25 calls : x 1,000 at $6.85 -

(this matches a real trade done today in one of my trading portfolios)

 

Yesterday, I sold some higher strike SLV calls, that were no longer needed

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