I have crazy respect for the guy who laid out 1 million dollars 2 weeks ago and bought 100k July 25 puts on the SLV at .10. He is now up 6 million on his position. That takes stones.
Can you ever imagine if the s&p 500 had a chart like this, it would be a matter of national emergency. When commodities or metals get killed like this, outside of the trading and spec community, it's as if it never happened. But if/when a basket of stocks drops a few percent, you'd think the world was ending from all the rhetoric and fear mongering that a slide in stocks supposedly causes.
I like those stories. Really, a guy could trade a handful of times a year putting on those outlier puts and take the small hits simply due to the fact that the one home run more than makes up for all of the smaller losses. Of course, you have to find the right market for it, which is an art form in and of itself. Instead, most guys become addicted to the constant stream of small insignificant gains and employ the reverse strategy.
He bought at .10. It was well publicized LV Jul 2011 25.000 put (OPR: SLV110716P00025000 ) Last Trade: 0.72 Trade Time: 3:42PM EDT Change: 0.47 (188.00%) Prev Close: 0.25 Open: 0.33 Bid: 0.70 Ask: 0.72 Day's Range: 0.33 - 0.72 Contract Range: N/A - N/A Volume: 15,448 Open Interest: 120,135 Strike: 25.00 Expire Date: 15-Jul-11
If you're expecting a quick reversal, why not buy the May calls? I'm not questioning the trade, I just would like to understand the benefits of a further out expiration when expecting a quick reversal move. Thanks.
I don't have a position in silver. But I will say, I'm not convinced the liquidation in commodities is over. The *huge* sell off in crude (as well as a number of other instruments) today almost always means there will be a wave of margin calls. You can't tell me that every investor who was long crude yesterday had a chance to sell on the way down, today... especially when you consider Asia even hasn't had a chance to digest the move today. (And Europe missed out on much of the greatest decline.) I think there may very well be another wave of selling tomorrow in many commodities, on the back of margin calls + additional liquidation, forced by today's action. I don't think there will be many margin calls left in silver at this point, but I do think they'll be liquidated along with everything else as people are forced into cash.
I agree. The only thing I can compare this to in recent memory was crude oil back in 2008. Just the sharpness of the move and the percentage declines. Where I also see similarities is that almost everybody is buying on the way down. Whereas on the way up I just saw skepticism, kind of par for the course with the perversity of markets. On the other hand, (and this is the part that gets tricky), physical demand for silver is still large (I think mainly because to take delivery is not that onerous and can be done in small retail sized increments). Whereas with crude it's not a small time operation to get your hands dirty with that commodity.
Will be interesting to see how Japan reacts after their Golden Week holidays, away since Monday and probably only a few traders back at their desks on Friday. I'm sure some traders will be choking on their breakfasts, seeing a 20%+ drop in Silver in such a short space of time.