Yesterday I entered into the following transaction:
04/16/2012 STO 3 SLV April 21 2012 30 Puts @.29 74.71
Silver has been pretty steady in the 30 - 32 range for quite some time now. In this account we have some longer term trades so I wanted to put some shorter term money to work. Even though SLV has been range bound the option premiums are still relatively high. It is very easy to roll out and down for a credit especially since there are weekly options available so an exit strategy is in place. If these puts expire worthless we will earn 4.3% in 5 days on $1737.13 in margin maintenance. That equates to 313.9% annual.
Risks are strength in the dollar and that the GLD and SLV house of cards come crashing down as there is no guarantee these precious metals are backed by physical gold and silver.
Hi Chester
ReplyDeleteI have a question or perhaps an observation. In this trade your protection is on 1.8%. Thanks to your blog I stumbled on fullyinformed.com website. I was going through her put selling index here: http://www.fullyinformed.com/put-selling-index/ and I came across her articles on AGQ here: http://www.fullyinformed.com/agq-proshares-part1/ So I looked over the AGQ versus SLV and I sold the April $47 for .59. It's about 1.2% return for a few days holding but the protection is $4.80 or 9.2%. Now this is an ultra so the level of protection is only half that or 4.6%, but still, that's a lot more protection. I then checked out May puts and the $45 put was trading for 1.45 or 3.2%. Protection would be $6.80 or 13% or 6.5% because of it being an ultra. I wouldn't sell it right now I know because May is 5 weeks away, but when there is only a couple of weeks left I think I may look again.
So what is your take on all this? I love put selling. I couldn't figure out how to post this so I used anonymous. I don't have a website url.
Fred Harris
Silver is a lot more volitle than gold.
DeleteHi Fred, AGQ does have some high premiums and I understand and like your trade. I see your point. Personally I don't like trading leverage ETF's because they naturally decline over time if you hold them. They also don't match my risk appetite anymore. I think Fully Informed went through the exercise for a reader of hers but she doesn't trade AGQ. Good luck and please come back again! Chester
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