Beating Buy and Hold (thru disciplined speculation)

[drbubb]

SLV SEP 17 2011 34.00 CALL

. . .

These are cheap enough now to buy 2,000 for each Alt.Portfolio

 

SLV $34 Calls, at $5 x2000 = $10,000 each portfolio

Having picked up those $34 calls yesterday,

I plan to do some selling into the opening.

 

I shall look to unload: (from Alt.Port.#2)

 

d1:oct$30c : bot at $6.50 1,000

 

...and maybe:

 

c2:aug$34c : bot at $4.00 2,000

== == ==

 

in edit: I will offer the Oct$30c at $9.90,

and maybe move that lower after the opening

 

After opening: bid: 9.45 - offer: 9.55

I am moving my level to 9.80

[drbubb]

in edit: I will offer the Oct$30c at $9.90,

and maybe move that lower after the opening

 

After opening: bid: 9.45 - offer: 9.55

I am moving my level to 9.80

For the Oct.$30 calls:

I took $9.45, selling 1,000 x $9.45, for $9,450 - Alt.P#2

 

As an experiment, instead of selling the Aug.$34calls here,

I have BOT ZSL calls, as follows:

 

Status Filled at $1.70

Symbol -ZSL110820C12

CALL (ZSL) PROSHARES TR II AUG 20 11 $12 (100 SHS) ... ZSL chart

Action Buy to Open Call (size: 2,000 x $1.70= $3,400 - Alt.P#1)

 

What is this?

ZSL / ProShares UltraShort Silver (ETF)

 

These are 2X Short on Silver, and I traded when ZSL was about $13.40

 

Since I was buying $12calls, they had an Intrinsic Value then of $1.40,

and I paid an extra $0.30 for time value.

[drbubb]

ZSL Options... Comparing Performance with SLV Options

For purposes of these calculations, I have assumed options on 5,000 ZSL shares

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

 

Starting point: When SLV was $39.00 / ZSL was about $13.40

 

Given its construction, ZSL should move DOUBLE the %, but in opposite direction.

Let's look at today's price action:

 

1)

SLV : 39.1374 / Change: +0.8474 // Percent Change: +2.21%

Open: 39.14 / High: 39.18 / Low: 38.72

Volume: 7,324,435

 

2)

ZSL : 13.2893 / Change: -0.5907 // Percent Change: -4.26%

Open: 13.28 / High: 13.56 / Low: 13.24

Volume: 3,423,106

 

That is rather close to the expected price move...

200% is expected: ZSL moved 193% as much, in the inverse direction.

 

This also suggest that...

Buying ZSL at $13.40, is like shorting Silver at $39.00.

But that 5,000* ZSL is not equivalent to 5,000* SLV,

There is a different size involved. Can it be calculated?

 

Compare: The size of ZSL Face Amount, with the size of SLV Face:

Underlying: ($13.40 x 2)/$39.00 = 68.7% as much, so:

5,000 x 68.7% = 3,435 shares equiv. Short on SLV

 

And since I have paid an Intrinsic Value of $1.40 x 5,000,

that's $7,000 / 3,435, or about $2.04 per SLV share.

 

So these :

ZSL $12.00 calls x 5,000 are like owning:

SLV Puts which are $2 in-the-money, ie : $41.00 puts x 3,435

 

Had I Bought Aug.$41 puts, I would have paid: about $2.65 each

That's:

Intrin Value: $2.00 approx

Time Value: $0.65 approx

Total Value: $2.65

 

The Aug.$41 puts look cheaper than the ZSL calls, since:

 

ZSL-Aug.$12c : $1.70 x 5,000 = $8,500 : 103.1%

SLV-Aug.$41p : $2.65 x 3,435 = $9,103 : 107.1% (about 7% more)

== == ==

 

*Note: initial notional buy was 2,000 shares at $1.70, costing $3,400.

Later you will see I bought 3,000 more at $1.00/sh., see below

[sine270]

NEVER EVER ?

 

Lessons for the brain-dead ?

 

 

 

"Never ever ever ... sell your Gold !" says Robert Ian on this weekend's Goldseek Radio

 

I think i heard something similar about Silver, right near the top.

 

If there were an interest rate function function on that graph it might paint a slightly different picture.

[drbubb]

ACTUAL TRADES

 

1) SLV calls: Jan.$27

 

YOU SOLD CLOSING TRANSACTION -SLV

C27 CALL (SLV) ISHARES SILVER TR JAN 21 12 $27

Cash Price: $14.15 x 1,000 = $14,150

 

 

2) ZSL calls - adding to position

 

YOU BOUGHT OPENING TRANSACTION -ZSL

C12 CALL (ZSL) PROSHARES TR II AUG 20 11 $12 (100 SHS)

Cash Price: $1.00 x3,000 = $3,000

 

Note:

I had the size wrong in prior transaction.

This latest transaction represent 60% of total transaction

and the prior one was 40% - this is based upon the size of

my actual trades.

 

So I am revising, as follows;

 

40% at $1.70 x 2,000 = $3,400

60% at $1.00 x 3,000 = $3,000

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

Ave is $1.28 x 5,000 = $6,400

 

 

CLOSING PRICES

wed:

zsl: $12.30 / $12c : $1.00 x x,xxx

slv: $40.55 / $41p : $1.65 x x,xxx

thu:

[drbubb]

GOLD AND SILVER - Done for awhile?

 

I got Bearish earlier today, when I saw Gold was up DESPITE:

 

+ Oil being down almost 1.5%

+ The US Dollar being up over 1%

 

The move in precious metals looked like an anomoly, and hence highly vulnerable

 

The MOVE DOWN in Gold and Silver looks like an important TURNING POINT to the downside

 

Because of the HEAVY VOLUME --- see: SLV chart : GLD chart

[Errol]

important TURNING POINT to the downside

 

A correction, no more. And hopefully a nice substantial one. No more or less important than any of the other corrections we've had since 2000.

[Errol]

I should correct myself really. I expect it to be less (if I had to guess) of a correction (unfortunately).

 

The final part of 2011 should see a massive rally taking gold well over $1700 and onwards.

[drbubb]

A correction, no more. And hopefully a nice substantial one. No more or less important than any of the other corrections we've had since 2000.

already...

SLV

USDISHARES SILVER TRUST

Last [Tick] $37.59[+]

Change $-2.96

% Change -7.30%

 

We could see: $30-33, and even lower

[Errol]

We could see: $30-33, and even lower

 

Massive buying opportunity.

[drbubb]

Massive buying opportunity.

maybe.

could go lower than that too, if we get the US dollar short squeeze

[drbubb]

COMPARISON : Notional size of 5,000 ZSL options

 

ZSL-Aug$12c x5000 "equivalent" to: SLV-$41p x3435

 

original buy:

zsl: $13.40 / $12c : $1.70 x 5,000 = $ 8,500

slv: $39.00 / $41p : $2.65 x 3,435 = $ 9,103 (107.1%)

wed 08/03:

zsl: $12.30 -$0.52 (-4.23%) / $12c : $1.00 x 5,000 = $ 5,000

slv: $40.55 +$0.73 (+1.83%) / $41p : $1.65 x 3,435 = $ 5,668 (113.4%)

thu 08/04:

zsl: $14.08 +$1.78 (14.47%) / $12c : $2.40 x 5,000 = $12,000

slv: $37.61 -$2.91 (-7.25%) / $41p : $3.80 x 3,435 = $13,053 (108.8%)

fri 08/05:

zsl: $14.33 +$0.25 (+1.78%) / $12c : $2.62 x 5,000 = $13,100

slv: $37.32 -$0.29 (-0.77%) / $41p : $4.05 x 3,435 = $13,912 (106.2%)

[drbubb]

Latest : 8/05/11 : 7/29/11 : 7/22 : 7/15/11 : 7/08 : 7/01/11

 

SLV-- : $37.61 : $38.83 : $39.07 : $38.24 : $35.75 : $33.00 :

Silver : $38.33 : $39.89 : $40.10 : $39.07 : $36.54 : $33.70 :

Prem. : +$0.72 : +$1.06 : +$1.03 : +$0.81 : +$0.79 : +$0.70 :

====

DXY--- : $74.54 : $73.75 : $74.14 : $75.13 : $75.08 : $74.36

UUP---: $21.22 : $21.03 : $21.13 : $21.43 : $21.42 : $21.20 :

CRB--- : 326.08 : 342.08 : 347.93 : 346.30 : 343.55 : 336.71 :

Rsilver :: 8.000 : : 8.371 : : 8.325 : : 8.291 : : 7.813 : : 7.510

===

Ag.$38p: $1.83 : $1.16 : $1.21 : $1.73 : ==== : ==== :

Ag.$34c: $3.75 : $5.10 : $5.32 : $4.65 : ==== : ==== :

Ja.$27c: 11.20 : 12.42 : 12.65 : 11.87 : $9.55 : $7.27

Sp.$34c: $4.40 : /5.00/

Oc.$30c: $8.00 : $9.27 : $9.47 : $8.75 : $6.45 : $4.40

Ja.$27c: 11.20 : 12.42 : 12.65 : 11.87 : $9.55 : $7.27

Zsl$12c: $2.62 : /1.28/

ATX.v- : $0.93 : $1.00 : $1.02 : $1.26 : $0.98 : $0.76

===

Trades this week:

BOT : Sep.$34c: at $5.00 x2000= $10,000 (-) Both: #1 & #2

SLD : Oct.$30c: at $9.45 x1000= $9,450 (+) Alt.2

BOT : Zsl-aug$12c: $1.28 x5,000= $ 6,400 (-) Alt.1

SLD : Jan.$27c: at $14.15 x1000= $14,075 (+) Alt.2

[drbubb]

OUTPERFORMANCE improved further... as we make small week-to-week trades

 

RECORD

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

my 2010 --- $182.1 K : ======= : ====== : ====== : ====== :: $18.21 x86.04 / 2.5852 =# 6.061

ye 2010: --- $301.8 K : ======= : ====== : ====== : ====== :: $30.18 x78.96 / 3.3280 =# 7.160

28 Apr.: --- $480.0 K : - $480.0K : - $480.0 K : $480.0K : 100.0% : $47.26 x73.12 / 3.7056 =# 9.326

06 May: --- $355.0 K : - $479.9K : - $480.0 K : $479.9K : 135.2% : $34.48 x74.84 / 3.3735 =# 7.650

13 May: --- $353.6 K : - $491.6K : - $480.2 K : $485.9K : 137.4% : $34.39 x75.71 / 3.3853 =# 7.692

20 May: --- $350.3 K : - $495.3K : - $486.2 K : $490.8K : 140.1% : $34.18 x75.66 / 3.4156 =# 7.571

27 May.est $380.0 K : - $518.0K : - $511.0 K : $514.5K : 135.4% : $37.03 x74.76 / 3.4627 =# 7.995

31 May: --- $384.8 K : - $523.8K : - $516.3 K : $520.0K : 135.1% : $37.60 x74.50 / 3.5006 =# 8.002

03 Jun.: --- $361.9 K : - $509.0K : - $497.9 K : $503.4K : 139.1% : $35.34 x73.73 / 3.4861 =# 7.474

10 Jun.: --- $362.0 K : - $504.0K : - $493.4 K : $498.7K : 137.8% : $35.25 x74.83 / 3.4804 =# 7.579

17 Jun.: --- $357.5 K : - $502.7K : - $491.2 K : $497.0K : 139.0% : $34.95 x74.99 / 3.3548 =# 7.812

24 Jun.: --- $346.4 K : - $484.9K : - $471.8 K : $478.4K : 138.1% : $33.36 x75.58 / 3.2989 =# 7.643

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

Vs B&H: -- 100.0% - : -- 139.42% : -- 140.01% :

 

At 05 Aug., the average of the two Alt. Portfolios was $153,343 ahead of Buy&Hold.

 

Versus $135,200 ahead at 1 July when the Outperformance was 140.1%

 

/see DETAILED PORTFOLIO:

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

[Pixel8r]

Hoarding Gold Beats Charts Over 25 Years: Technical Analysis

 

By Nicholas Larkin - Aug 5, 2011 12:01 AM GMT+0100

 

A buy-and-hold strategy for gold made investors more money during the past quarter century than any technical analysis tool.

 

While ichimoku chart, moving average oscillator, directional movement indicator and variable moving average techniques as much as doubled profits since August 1986, holding onto bullion would have boosted investors' money more than fourfold, according to data compiled by Bloomberg. The returns from buying the metal and using 22 other individual strategies that use chart patterns don't account for trading costs...

 

 

[warpig]

Well that solves that then... Thread killer!

 

Hoarding Gold Beats Charts Over 25 Years: Technical Analysis

 

By Nicholas Larkin - Aug 5, 2011 12:01 AM GMT+0100

[drbubb]

Hoarding Gold Beats Charts Over 25 Years: Technical Analysis

Okay.

 

But my actual trades on this thread are beating Buy&Hold by a comfortable margin:

So far, I am ahead by $153,343, and over 40%.

 

Moreover, just now, I am still LONG Silver to the same, or greater

extent than the competing Buy & Hold portfolio, as shown by this:

 

POSITIONS : In Silver ounce equivalents

Record :: B&H Portf : Alt.Pt. #1 : Alt.Pt. #2 : Average : -Ratio- :

Physical : + 10,000 : + 05,000 : + 00,000 :

SLV shs. : + 00,000 : + 00,000 : + 02,000 :

SLV C's. : + 00,000 : + 05,000 : + 09,000 :

====== : ======== : ======== : ======== :

Longs .. : + 10,000 : + 10,000 : + 11,000 : + 10,500 : 105.0%

 

SLV P's. : + 00,000 : + 02,000 : + 00,000 :

ZSL eqv.: + 00,000 : + 03,435 : + 03,435 : (in SLV. put equiv.)

 

Above is before Silver related equities

ATX shs : + 00,000 : + 10,000 : + 10,000

Shs eqv. : + 00,000 : + 00,250 : + 00,250

 

UNQUOTE = = = = = = = = = = = = = = = = =

 

I may take some profits today on my "excess Longs" beyond 10,000 oz. equiv.,

by Selling 1,000 shares of the SLV calls in the Alt.P#2 Portfolio.

 

In fact, I might go beyond that and sell down more SLV calls and replace

them with calls on Silver stocks.

[Errol]

Hoarding Gold Beats Charts Over 25 Years: Technical Analysis

 

lol. Nice.

[drbubb]

lol. Nice.

I think we all know what Buy&Hold means.

 

But there are different ways of measuring the results of "Trading using Technical Analysis."

 

Rather than going back and trying to measure this, I am showing a result by DOING IT day-to-day.

 

So far, I am ahead by $153,343, and over 40%, and that's better than making some tired statistical

analysis of history - Don't you think ??

[drbubb]

GOLD - back testing those "recent" highs ?

 

 

I also note that an old Gold hogh was $1050, and now we have:

 

$1050 x 1.618 = $1,699

[Pixel8r]

Okay.

 

But my actual trades on this thread are beating Buy&Hold by a comfortable margin.

Are you including fees in this fantasy/real portfolio? The problem I see with trading is that fees for trading in and out soon eat away at your profit, especially if like the average person you don't have very large amounts of cash to play with.

[drbubb]

Are you including fees in this fantasy/real portfolio? The problem I see with trading is that fees for trading in and out soon eat away at your profit, especially if like the average person you don't have very large amounts of cash to play with.

The commissions are usually immaterial at $8 (or so) per trade, trading as a frequent trader thru Fidelity in the US. Take away maximum of a few thousand dollars from the $150,000+ of Outperformance. If you want to be conservative, take away $4-6,000 of that.

 

Many (in fact, most) if the trades are real, albeit in a different size.

[Pixel8r]

The commissions are usually immaterial at $8 (or so) per trade, trading as a frequent trader thru Fidelity in the US. Take away maximum of a few thousand dollars from the $150,000+ of Outperformance. If you want to be conservative, take away $4-6,000 of that.

 

Many (in fact, most) if the trades are real, albeit in a different size.

The thing is you are an experienced professional and have a large amount of money to play with, most are not proficient in use of leveraged paper instruments and don't have the same sort of money to play with or discipline that it requires. Trying to teach everyone to do what you are doing is very dangerous IMO, most should be encoraged just to protect their wealth as Jim Sinclair has been talking about for years.

 

I would imagine that there are paper traders that beat even you in playing the market, I have heard it said that the bullion banks (JPM, HSBC etc.) will be the ones who make the most out of gold even though they are short most of the time. When it comes down to it simply buying & holding is a way for everyone to protect their cash from the crooked bankers/governments and their paper games which have bought the world to this state.

 

I for one will be very happy if all this paper blows up in this financial crisis and we can get back to production rather than endless trading and one up man ship. Buying and holding physical metal will help that to happen.

 

Jim Rickards gave a very interesting analysis of the us leased gold at the weekend on KWN [link]. He has talked about how the gold although leased has never in fact left the vaults of the US (Fort Knox & West Point), that the bullion banks that have sold it think they are squared on their accounts as they have a paper transaction that says they are. At any point the US can close these leases and then the bullion banks will find themselves very short physical gold, then all of the unallocated accounts would be settled in paper. That is what worries me about attempting to trade paper gold via options and other forms of unallocated paper gold and silver, when this blows up you will be left with paper just when paper is losing value rapidly.

[drbubb]

I may take some profits today on my "excess Longs" beyond 10,000 oz. equiv.,

by selling 1,000 shares of the SLV calls in the Alt.P#2 Portfolio.

Sold.

At $12.20 x1,000 = $12,200

 

Will be looking to pick up "cheap" calls on a silver stock,

probably PAAS, or SSRI

 

Prices:

PAAS: $28.15[-] Change $-0.53 // -1.85%

SSRI: $25.12[-] Change $-0.41 // -1.61%

 

Update-1

Bought: PAAS Sep$25c at $4.00 x 2,000 = $8,000

 

Status Filled at $4.00 x 2,000

Symbol -PAAS110917C25

Description CALL (PAAS) PAN AMERICAN SILVER SEP 17 11 $25 (100 SHS)

Action Buy to Open Call

 

Update-2

Sold: SLV Aug$34c x 2,000 at $4.50 = $9,000

SLV110820C34

SLV AUG 20 2011 34.00 CALL

Last [Tick] 4.50[-] Change 0.95

Open 4.80

Day High: 4.80 / Day Low 4.50

Bid 4.40 / Bid Size 1,031

Ask 4.50

 

In effect, I have Replaced:

SLV= Aug$34 calls, with

PAAS Sep$25 calls

[drbubb]

TRADING THIS WAY- is LESS risky than Buy & Hold

 

The thing is you are an experienced professional and have a large amount of money to play with, most are not proficient in use of leveraged paper instruments and don't have the same sort of money to play with or discipline that it requires. Trying to teach everyone to do what you are doing is very dangerous IMO, most should be encoraged just to protect their wealth as Jim Sinclair has been talking about for years.

What's dangerous about it?

 

I am doing VERY LOW RISK Trading, which is ungeared, and close to 80-100% long most of the time, backed up by large amounts of cash. (In fact, it is probably less risky trading than Buy&Hold since I am taking LESS PRICE RISK most of the time, and am also less exposed to physical storage risk.)

 

My main tactic is exploiting the flexibility inherent in using options, playing around with my positions "on the edges", but sticking with a solid core LONG position.

 

Have you really tried to understand these trades, and how I am using options?

 

Let's look at today's SWAP of SLV calls into PAAS calls:

 

This is one of the more risky trades I have done in the Alt.Portfolio#2, but it really only involves a swap of positions worth less than $10,000 (or under 1.9% of overall portfolio value), so it is hardly a big deal.

 

Here are some bulletpoints about it.

 

+ I am "staying long" a major silver proxy (since PAAS is a large producer of silver, which also pays a dividend - 0.36%)

 

+ I am entering the trade when PAAS is at a very cheap valuation relative to silver

 

PAAS / Pan American Silver ... update

RATIO: PAAS-to-SLV

 

+ The current ratio is: PAAS-$28.15; SLV-$38.40 : Ratio: 73.3%, which is near/at the lowest ratio it has traded at for some years. Since late 2008, it has varied between about 72% and 165%. If Silver stays where it is, and the ratio goes back to just 90%, which is well below its 2 year mean of about 110%, then PAAS will go to $34.56.

 

+ The way I did the trade was conservative. I sold August $34-Calls on SLV, which are going to expire in two weeks anyway, getting $4.50 - which is equivalent to $38.50, if exercised. And I bought September calls on PAAS, giving me an extra four weeks to decide whether to sell them or exercise them. I am aware that those extra weeks will take me into the "best weeks" of September, when there is normally a season jump in these stocks. Assuming I exercise, then I will have PAAS at $25 + $4.00, 0r $29 per share. That gives me PAAS/SLV at $29/$38.50, or a ratio of 75.3%, with nearly 6 weeks for this ratio to make me money.