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tjnoon

Anyone Trading Silver?

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You hear a lot about gold these days and for good reason, for sure. And while I wouldn't knock the gold bugs, I think that silver is worth looking at. It has been a very profitable and consistent trade. I like following a 233 tick chart with the trade method I use but the problem is, that the risk parameters could be quite large so if one isn't adequately capitalized, it becomes too dangerous. Even the winniest trade strategies go through their tough sessions and you have to have the trade capital to get through the losses or you won't be left standing to take the next trade which, at the very moment you throw in the towel, will inevitably begin the next 10 trade winning streak. Murphy's Law, right?

 

BUT, there is a solution. You can successfully prosper from the nice price action in the silver market by using silver ETFs. AND, you can get good leverage by trading options in those markets. That's what I've been doing lately and I'm loving the results. But instead of daytrading, I'm using a 195 minute chart to put on short term swing trades. Below are a few screen shots of three different ways to trade silver.

 

The first screenshot is a recap of today's 233 tick chart. It was very profitable as it usually is BUT, each trade required a considerable amount of risk, at $50 per 1 cent move in the contract. To trade this strategy safely and with responsible risk allotment, you probably need a $50,000 account. Otherwise, you'll find yourself trading with scared money when you get a few losses and scared money is DEAD money. Lost money!

 

The 2nd chart, SLV (iShares Silver Trust), is a trade that I am currently in. It is a swing trade strategy that I like to trade with 4 positions. But rather than trade the shares outright, I am trading options with the nearest 'in the money' option to the entry price of the trade, as it is shown on the SLV 195 minute chart. I have already exited two positions and am letting the remaining positions play out until the trade ends. This strategy has won over 72% of its trades over the past two years. And, with options, you have great control over your risk and position size.

 

The 3rd chart is another Silver ETF, AGQ (ProShares Ultra Silver). This one also has won a very handsome 72.6% over the same two year period. Makes sense, right? This one trades at a completely different cadence however. I wanted to show this chart because there is a new trade that has set up and may trigger in soon. I would make a small adjustment to get above the swing level however. This one is a much higher stock price but with options, using the same strategy as I'm using with SLV, this is a very profitable strategy. Because there is so much time left with March options, the percentage returns are not as great as they would be later in the month. You could get better returns with Feb options but you might have to roll them over to March if the trade doesn't conclude in time. This setup could cancel but for now, the setup is valid and will be confirmed if the trade triggers in prior to cancelling. We'll see.

 

Regardless, silver is a market worth trading. It is steady and profitable. Check it out.

021111_si.thumb.gif.c9095812e4e46b12bbba78cc79e9c13c.gif

021111_slv.gif.efcd92ac596275487acdf8cf83a0bb8b.gif

021111_AGQ.thumb.gif.8f7bdc317f7631c81943b88bcd3d4013.gif

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A lot has happened since I posted the last time regarding Silver. I thought I would do a follow up and share with you today's blog post I put up in the Seven Summits Trader Blog. Notice where the price is today vs. the price on the trade examples above. This post also highlights a new setup that we are very keen on. It's worth taking a close look at because it is based on pure price action and continues to work across multiple markets and timeframes. You'll see the example in the post below.

 

Got Bob?

In yesterday's post, I showed you a GetB.o.B. trade that was forming on the iShares Silver Trust ETF, SLV. Did you get it? Today, we exited fixed positions at both the 2nd and 3rd targets and are now trailing the remainder of our position with guaranteed profits locked in. I personally Got B.o.B. (got back on board) using May 42 call options.

 

The entry was at 42.67 so I bought slightly in the money calls. The price for each call option was 2.24 each. I exited my first position when SLV hit its middle target at 43.56. That's an .89 gain on the straight ETF (stock), which is a 2% gain. Not bad for a quick trade but if you bought 100 shares per position, you'd have to commit a bunch of your trade capital. Still though, if you could make 2% on every trade, you could conceivably trade yourself to riches. Check out the options result though.

 

I exited my first position when the ETF hit its middle target. My options were now worth 2.75, which is a .51 gain. It's a smaller gain from a point total point of view but consider this. Each option only cost $224. When I exited with a $275 proceed, $51 profit per option, my percentage return on my invested capital was 23%! That's over 200% better and a 200% better use of my capital from a pure ROI (return on investment) basis.

 

The story gets better though. I exited the 2nd third of my position at the 3rd target of 43.93. The option sold at 2.90 (I actually exited a few pennies below the full target when it stalled at 43.90. I'm a firm believer of 'trading for profit' and not fighting over a few ticks). The 2nd position gained 29%. I tightend my stop on the 3rd, trailing part of the trade to give this a chance to hit a homerun. I have profit locked in no matter what, and in spirit of the SST, I have a pure risk free trade that is live and still going.

 

See SLV Chart with GetBob Trade Example; (You can see the setup from yesterday. Here is the current chart from today.)

042011_slv.gif.3c36b0b46765abbb281a3b15e2f3ec82.gif

041911_slvBob.thumb.gif.c671b2039c982df51fe4c195b4dfdb17.gif

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Silver has been the best trade for last 7 months, the following table makes the point...

 

Total return since August 27, 2010

Global Asset

140.4% Silver

75.1% Corn

39.0% Crude Oil

38.2% Russell 2000 Index (Broad Stock Market)

36.3% CRB Commodities Index

35.8% Coal

35.1% Soybeans

31.8% Nasdaq

30.1% Copper

27.2% S&P 500 (Large-Cap Stocks)

25.2% Dow Jones Average (Large-Cap Stocks)

21.1% Gold

18.3% Financial Sector SPDR Fund (Big Banks)

5.6% Producer Price Index

2.3% Consumer Price Index

-2.2% Investment Grade Corporate Bond Fund

-2.6% 10-Year U.S. Treasury Bond Total Return

-10.6% U.S. Dollar Index

 

In hindsight, in such a strong uptrend, do you think its better to simply buy & hold instead of actively trading it?

 

MMS

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Agree on Silver though the intraday volatility/trading range is what really makes it so much more tradeable than years past. It's one thing to have a larger overall percentage gain, but it's also the behavior intraday which I never would have considered a few years ago. Now with the much higher prices (throw Gold in there as well) it becomes highly tradeable for a daytrader.

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I am short silver at 49.030 looking for $30 by year end :)

 

wow you are a brave man shorting silver!! i'm still in the trade, took a beating today, but my horizon is probably a little longer than yours. if it does go to $30 i'm buying, long term the US dollar is done. best of luck with your short

 

MMS

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wow you are a brave man shorting silver!! i'm still in the trade, took a beating today, but my horizon is probably a little longer than yours. if it does go to $30 i'm buying, long term the US dollar is done. best of luck with your short

 

MMS

 

Hey thanks...can't believe it really. Biggest profit trade I have ever had. Today had some good profit, gave a little back, but really want it as a long term trade because I entered it that way. I can't take all the credit though...my advisor told me to do it haha:crap:

 

Here is a screenshot I had to make since I won't ever see this again off 2 contracts :D

silver_april_26_001.thumb.png.5c2435138c2b04e8166289d1008e9e95.png

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I recently closed out of some puts for a nice triple digit percent gain on both SLV and GLD. Not sure if I'll be getting long or short at this point. Waiting for my system to give me a set up.

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Been awhile since I posted here. I'm hoping to find a local dealer and snag some Silver after the fall from grace. Anybody in the Buffalo NY area with suggestions on dealers?

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