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drbubb

Beating Buy and Hold (thru disciplined speculation)

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There was nothing smart about Tom O'brien calling the top in gold at somewhere around $1200 and then watching as gold carried on higher. Has he now bought back in at a higher price, where is the smartness in that?

Tom doesnt always get it right, but I think he made something like 63% on his Silver shorts (the 2x or 3x instrument),

and that covers alot of the ground he lost from being out of the Gold market.

 

Traders can make big money fast, when they are on the right side.

 

I have an orders in on May SLV puts. If they order gets hit, I will report the trade and put it into the #1 Portfolio.

 

Hedge Fund John Burbank is on Bloomberg now talking about why he sold down on his Gold positions. He makes far more sense to me than the Bob Chapman's and Jim Sinclair's of the world - the piping B&H mafia, now scratching at the sky, wondering how long they will need to wait before silver prices revisit the old highs. (that description is for CJ and Sch.)

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Tom doesnt always get it right, but I think he made something like 63% on his Silver shorts (the 2x or 3x instrument),

and that covers alot of the ground he lost from being out of the Gold market.

 

Traders can make big money fast, when they are on the right side.

 

I have an orders in on May SLV puts. If they order gets hit, I will report the trade and put it into the #1 Portfolio.

 

John Burbank is on Bloomberg now tooking about why he sold down on his Gold positions. He makes far more sense to me than the Bob Chapman's and Jim Sinclair's of the world - the piping B&H mafia, now scratching at the sky, wondering how long they will need to wait to the old highs. (that description is for CJ and Sch.)

You will see from my new thread my thinking on this and why profit should not be the be all and end all of existence.

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You will see from my new thread my thinking on this and why profit should not be the be all and end all of existence.

???

What brought that on?

 

Many here would like to learn how to trade options on Precious metals, and this thread will show people how.

What's the problem in that?

 

As you know from my many other threads, I am interested in far more than just making profits.

But many of those other ideas stir less interest here.

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???

What brought that on?

 

Many here would like to learn how to trade options on Precious metals, and this thread will show people how.

What's the problem in that?

 

As you know from my many other threads, I am interested in far more than joust making profits. But many of those other ideas stir less interest here.

It has been something on my mind for years and the "mafia" jibe in your title helped to bring it clear in my mind. If you look back through my posts from years ago, I have always mentioned that I felt that investment needed to go back to its original purpose, which is to provide funds for expansion and production, rather than the continual need to improve one up man ship of trading.Trading brings about winners and losers, investment of capital should be a winning proposition for both the borrower and the lender so both win in effect.

 

I am not insulting you personally I am just making an observation of what I believe is a major problem in the world today.

 

 

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It has been something on my mind for years and the "mafia" jibe in your title helped to bring it clear in my mind. If you look back through my posts from years ago, I have always mentioned that I felt that investment needed to go back to its original purpose, which is to provide funds for expansion and production, rather than the continual need to improve one up man ship of trading.Trading brings about winners and losers, investment of capital should be a winning proposition for both the borrower and the lender so both win in effect.

 

I am not insulting you personally I am just making an observation of what I believe is a major problem in the world today.

Do you think I would disagree?

 

I think that capital gains taxes could be tinkered with, to encourage longer term profits.

Hedge Fund managers make FAR TOO MUCH MONEY for the zero sum game they are playing

 

But at least it is not a NEGATIVE SUM GAME, as military spending is.

 

Tax policy should encourage positive sum investing and spending on things like R&D.

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I have an orders in on May SLV puts. If they order gets hit, I will report the trade and put it into the #1 Portfolio.

I BOT some May $40 puts just now

 

Buy to Open Put -SLV110521P40

Order Number:E09NHTGC

Details Filled at $4.15

 

Having missed the LOW earlier today at $3.95, I have split the order

 

20,000 filled now - 30,000 left in at $3.25 (DAY order)

 

This insures that I will not lose money on (a 20,000 portion of) the June Calls acquired last week

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I BOT some May $40 puts just now

Details Filled at $4.15

20,000 filled now - 30,000 left in at $3.25 (DAY order)

Second portion did not fill.

Closing level was : Bid 3.60 - Ask 3.70

 

With SLV closing at: $36.98.

 

I still see resistance near $38, so the SLV rally may not be done yet.

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Does a margin hike effect the price of the purchase or holding of options?

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I BOT some May $40 puts just now

 

Buy to Open Put -SLV110521P40

Order Number:E09NHTGC

Details Filled at $4.15

 

Having missed the LOW earlier today at $3.95, I have split the order

 

20,000 filled now - 30,000 left in at $3.25 (DAY order)

I put the order back in today... And it just filled:

-SLV110521P40

Details Filled at $3.25

 

So: 20K $4.15 + 30K $3.25 = Average of $3.61

 

I still see resistance at/near SLV-$38 ... SLV-intraday-chart : SLV-daily

 

Today's action: (so far)

SLV : 37.64 change: +0.66 // Percent Change: +1.78%

Open: 37.24 High: 37.67 Low: 37.05 // Volume: 30,725,804

 

There's a GAP to fill near $38.

 

Question: Do I have enough confidence to "downsize" my 50,000 oz Call position?

 

Maybe, but not yet. I want to see how the price performs closer to $38.

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Does a margin hike effect the price of the purchase or holding of options?

Nope.

Not if you just hold options.

 

It may increase demand for them, since they become relatively more attractive than straight futures

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There's a GAP to fill near $38.

 

Question: Do I have enough confidence to "downsize" my 50,000 oz Call position?

 

Maybe, but not yet. I want to see how the price performs closer to $38.

The Gap is virtually Filled,

And I am taking 20,000 of the Jun $30 calls "off the table" at $7.50

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The Gap is virtually Filled,

And I am taking 20,000 of the Jun $30 calls "off the table" at $7.50

Thanks goodness, I did that trade.

 

Today's action: (so far)

SLV : 37.64 change: +0.66 // Percent Change: +1.78%

Open: 37.24 High: 37.67 Low: 37.05 // Volume: 30,725,804

 

There's a GAP to fill near $38.

Yesterday's high was: $37.90 - that's "close enough for government work", I reckon !

 

The DROP IN COPPER earlier today, and the falling 8d.MA gave me a nice warning of Downside in Silver today.

 

So far, we see:

 

SLV : $35.43 Change: -2.09

Open: 36.48 High: 36.59 Low: 35.39 // Volume: 68,209,362

Percent Change: -5.57%

 

That's a big drop, and I think a retest of the recent low (SLV-$33.60) now looks very likely*.

 

A test of support near $30, and even a test of my IDEAL $26 TARGET looks possible too.

 

With the recent options trading in Portfolio #1, I am now well positioned to RIDE IT DOWN.

 

Power to smart trading !

 

== ==

 

*(in edit):

I have some orders in, which will get hit somewhere near $34.

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*(in edit):

I have some orders in, which will get hit somewhere near $34.

One of the orders got hit as SLV approached $34:

 

-SLV 111022C30

CALL (SLV) ISHARES SILVER TR OCT 22 11 $30 Call at: $6.50

 

I will put 20,000 in portfolio #2, initiating that one off with a longer dated Call

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ANOTHER FEARLESS FORECAST - But I need to stay flexible

 

What next for Silver? ... update

 

SLV-may11.gif.jpg

 

Probably $30, and maybe $26.

 

Why do I trade Options?

 

Because I know I cannot keep up these flawless forecasts forever. And I want to build flexibility into my portfolio.

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I put the order back in today... And it just filled:

-SLV110521P40

Details Filled at $3.25

 

So: 20K $4.15 + 30K $3.25 = Average of $3.61

 

 

 

Is it correct to say that you currently own 50,000 $40 strike May SLV puts? Have I read this right?

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Is it correct to say that you currently own 50,000 $40 strike May SLV puts? Have I read this right?

Not that many.

 

On this thread: I am running a "Fantasy portfolio" in SLV.

 

It is based on ACTUAL TRADES, and a few trades that I could have done (on market Bids or Offers), and may not have done because it did not fit in with the risks I want to take on. But most trades here are are mimicking actual trades I have made, and the prices used, are my actual execution prices (& I normally show an EXCERPT from the trade confirmation.)

 

But what is not accurate is the SIZE.

 

So I do own May SLV.$40 puts acquired in two tranches:

 

+ 40% at $4.15, and

+ 60% at $3.25.

 

(Note: they closed yesterday at $5.66)

 

But I do not own Puts on 50,000 shares. The actual size is quite a bit smaller than that.

(Note: it would be foolish to be so transparent on a huge portfolio of 50,000 ounces / 500 cts.)

 

Maybe if I keep trading so successfully, I can build it up into something in 7-figures (of underlying risk), but that will take awhile.

 

Meantime, I will continue to report the Fantasy portfolio in the sizes that are appropriate for that.

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I didn't realise how well that 89 day moving average works for silver. Very good.

 

I'd be amazed if it holds on this second wave of the correction, but it's still a great find.

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I got back involved in potential silver downside before the close last night with June SLW puts. The chart looks dreadful and I suspect that it might meet the dollar baseball bat down a dark alley soon! Silver futures off 7% overnight.

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I got back involved in potential silver downside before the close last night with June SLW puts. The chart looks dreadful and I suspect that it might meet the dollar baseball bat down a dark alley soon! Silver futures off 7% overnight.

The Silver Bulls caught the scent and have taken early flight.

 

I will toss in some cheap call Bids for the opening- This is a good sort of market to start building those long term call positions, using cash realised near $50

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From earlier today, sort of belongs here to.

Good, thanks.

 

This is not yet like 2008 - especially not in gold and oil. Silver would have to go below $24 for a 2008 repeat. Maybe we'll see it, maybe not.

 

If silver goes to these levels and the gold:silver ratio goes below 60:1, I might swap back even more than I already have (yes, I made a few silver ounces on the latest moves by swapping silver for gold and then back at appropriate times). HOWEVER, this was a smaller portion of my portfolio.

 

Here are the major reasons for buy & hold:

 

- Gold is far from a major historic top when relative expensiveness measures are considered (see chart below for one of many examples).

- Silver will follow gold in direction. It might overshoot gold. It might not.

- It is therefore time to buy & hold gold, and, maybe to a lesser extent, silver.

- Silver is riskier, so if you want to play safe, own more gold.

- Have an exit strategy for your gold (and silver) holdings. There will be a time when shares, houses, almost anything will look (very) cheap compared to gold. This is when you'll exit, but we're not there yet.

- Don't exit all at once. Average out, as you should have averaged in.

- Trading brings (major) risk into a buy & hold strategy. Even mistrading the gold:silver ratio could do serious damage to a portfolio.

- Don't overtrade.

 

From the 2001 lows up to the recent highs (1 decade):

- The $-price of gold has multiplied by 6.21, returning 520.92%, averaging a 20.03% annual return.

- The $-price of silver has multiplied by 12.44, returning 1,144.45%, averaging a 28.68% annual return.

 

What do you need more for a superb buy & hold strategy during the biggest financial crisis EVER?

 

The price goes up, and the price goes down. On average the price goes up. So, don't worry, gold is not done here. Paper bugs and top callers: dream on!

 

Here is how expensive gold is in comparison to the debt level of the US of A taking into account official gold holdings:

http://gold.approximity.com/since1970/Gold_Price_to_External_Debt_Equilibrium_Price.html

Gold_Price_to_External_Debt_Equilibrium_Price.png

This should immediately crack you up if you hear anyone shouting about a top in gold. :)

 

Yes, yes, there is always an intermediate top somewhere, somewhen. If you look at a price chart, there are at least ten intermediate tops every single day, hour, minute of the year.

 

Don't sweat the small stuff!

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From earlier today, sort of belongs here to.

Gold_Price_to_External_Debt_Equilibrium_Price.png

GF,

What is this chart meant to show?

 

I don't see any "mean reverting process" at work here.

 

If you use a Moving Average to indicate a mean, the period of that MA (if changed) will lead to wildly different Mean Levels

 

EXAMPLE:

GFchart.png.jpg

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"FLAWLESS" on Few Markets - but now I am seeking profits, not perfection

 

Bubb, I respect your considerabe skills as a trader but I can't let you away with that!

Every month since the summer 2009 you have been forecasting a sharp drop in the S&P. And you have been predicting that the gold bulls will be "clawing at the sky" for nearly as long!

Flawless, no.

Flawless on Silver (only !) - until that was written

(But the upturn which started at SLV-$31.97*, not $30 as I had expected, may have broken my nice run.

What a relief! I can now focus again on making money, rather than aiming for perfection.)

 

On SPX, I cannot claim perfection, or even a profit in 2010.

However, My calls on Gold have not been bad. I bought all the important lows over the last two years - check the record.

(BTW there was a decent pullback soon after my "clawing the sky" posting, which I bought. In fact, in spring 2010 I did mention that I was buying GLD calls "aggressively." So if you followed that, you would have beat the B&H crowd who had clawed the sky back in November 2009.)

 

And I was buying GDX calls yesterday, even though as I was doing that, I did not think we were on an important low for GLD yet. That view may or may not prove correct. But somehow, I don't think that Gold's seasonal dip is quite done for 2011 yet. (But if the upturn in Copper which we saw yesterday is sustained, I may need to change my mind soon.)

 

== == ==

*Actually, SLV trades at a discount (about 3-4% or $1.00+) to Silver, and Silver futures hit a low just over $32 in pre-NY traded,

and so if SLV traded at the same time, it might have hit $32.31 x 96.5% = $31.18.

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