Market Harmony wrote:I thought it might be a good idea to involve the entire membership in some idea sharing in regards to capitalizing on the volatility and longer term perspective of precious metals. This can be anything from a flipping opportunity, to stocks, to buy and hold, to funds, to private investments, to anything related to precious metals. Think inside and outside the box. There have got to be some great ideas from the good folks here at realcent. Some of you might not want to share for fear of TMI being available. I understand that. But at least give us something that might spark the same idea that you had without giving away the details.
Here's what I am think about today... silver price has gone down recently, and I look at this as an opportunity to do 2 things: #1, If silver is a leading indicator of anything, then I want to short the follower. #2 I want to place a buy order for some leveraged stocks and/or ETF's of silver at much lower pricing than today. Hopefully, the limit orders get filled, and I will then place another order on the options to sell those shares (buy a put) in the future at a higher price. Alternatively, though not as attractive, I could also sell covered calls on those shares. I view this as cheap and risk free way to own silver. If silver takes off, and I want to ride it out, all I have to do is close the option trades and let the underlying equity runs its course.
Sorry if I talked over anyone's head... these are a little more advanced strategies, but worth the time to educate yourself to learn them. If you understand what I'm talking about, then feel free to correct me or cheer me on.
What are your ideas?
Jonflyfish wrote:Sorry didn't realize snowflake comments.
Inflationhawk- What tail risk exists in selling puts if you are otherwise indifferent to be buying the underlying regardless of how low it goes?
Cheers!
inflationhawk wrote:Jonflyfish wrote:Sorry didn't realize snowflake comments.
Inflationhawk- What tail risk exists in selling puts if you are otherwise indifferent to be buying the underlying regardless of how low it goes?
Cheers!
You answered the question yourself by saying "if you are otherwise indifferent to be buying the underlying regardless of how low it goes."
Jonflyfish wrote:inflationhawk wrote:Jonflyfish wrote:Sorry didn't realize snowflake comments.
Inflationhawk- What tail risk exists in selling puts if you are otherwise indifferent to be buying the underlying regardless of how low it goes?
Cheers!
You answered the question yourself by saying "if you are otherwise indifferent to be buying the underlying regardless of how low it goes."
Not sure that is a risk of the strategy. MH was saying that he is placing limit orders to buy. If they get filled great, if not just the same. Selling puts would reduce the cost if assigned and keep the premium otherwise. Either way the objective is improved upon over the limit order. There isn't any tail risk in using the option as a vehicle to make the purchase. Once the asset is owned there is quotational risk but that has nothing to do with the transaction.
You said that "It works til it doesn't....tail risk can bite" but I'm not seeing how it relates to the purchase strategy. That sounds more like "Buy silver on dips...it works til it doesn't" but the mechanics of purchasing doesn't have that risk. Owning the underlying asset does. For that you can lay off the quotational risk with a hedge.
Cheers!
Chief wrote:I don't do paper silver. I will always have/want physical silver. You can't hold it, you don't own it right?
Lemon Thrower wrote:1. the reason to avoid paper silver is the daisy chain issue as with MF Global. You have counterparty risk you don't realize you have with paper, and you avoid that with physical. it is not to avoid government confiscation but counterparty risk.
2. johnyy, selling puts is an idea but you risk not getting filled. i took a flyer on one stock and sold puts but the price ran away and while i had identfied a good speculation i didn't profit because i was cheap. so there is still risk, just a different kind which is less severe than some other kinds. more of an opportunity cost or reinvestment rate risk than a default risk, but risk nonetheless.
barrytrot wrote:... Government seizure of physical assets and non-physical assets happens all the time. So physical doesn't help with that. And if you want to buy something in pre-Armageddon world that is worth more than a few thousand you need non-physical assets to do so. So, in the *current paradigm* non-physical is actually more useful and MORE "owned" than physical.
barrytrot wrote:That said, I do prefer "real" silver (physical) but paper is easier to handle, trade, and also has the ability to use derivatives as a source of income as opposed to physical silver which looks cool but gathers nothing but dust.
Chief wrote:barrytrot wrote:That said, I do prefer "real" silver (physical) but paper is easier to handle, trade, and also has the ability to use derivatives as a source of income as opposed to physical silver which looks cool but gathers nothing but dust.
With buying/selling/trading paper, don't you have to pay taxes on capital gains each year? While on the other hand with physical PM, you can buy all you want, but only pay taxes if/when you sell them for profit? I'd rather buy on dips and let it sit for 30 years. I am not the most knowledgeable with tax implications, but I did stay at a Holiday Inn Express last night.
Lemon Thrower wrote:MH - google "stink bids." (stock market term)
Rodebaugh wrote:Mike, quick crazy dips in spot or jumps for that matter tend to shake things up a bit on eBay. As a note to folks with limited funds and an eBay account.....keep your eye on auctions ending in the next day or so and new BIN listings. Bargains are sure to be had as an influx of nervous holders look to turn their coin.
silverflake wrote:Market Harmony - I like your thinking. I have been milking IAU and SLV with covered calls for a year now. I actually enjoy selling cash secured puts, usually out of the money with the thought that they expire and I get income from them. Perhaps you could sell some puts on SLV (or {gulp} AGQ) for income or hope it gets put to you (how low can it REALLY go...don't answer that). Any other angles out there?
Jonflyfish wrote:Thank you for the nice dialogue. Any such strategy needs to accomodate for Asian, Bermudan, American, Strip, European etc exercise provisions which can all be offset and used the way MH was proposing not to mention lease, warrants, swaps, swaptions etc. Obviously duration from prompt to LEAPS is also an important factor.
Cheers!
Lemon Thrower wrote:1. the reason to avoid paper silver is the daisy chain issue as with MF Global. You have counterparty risk you don't realize you have with paper, and you avoid that with physical. it is not to avoid government confiscation but counterparty risk.
2. johnyy, selling puts is an idea but you risk not getting filled. i took a flyer on one stock and sold puts but the price ran away and while i had identfied a good speculation i didn't profit because i was cheap. so there is still risk, just a different kind which is less severe than some other kinds. more of an opportunity cost or reinvestment rate risk than a default risk, but risk nonetheless.
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