I wish I would have been short this the last 2 and a half years

bluelobster · April 23, 2014 4:54AM

930% gain

you have to put up with some spikes, but eventually it will just split again.

derryb · April 23, 2014 5:39AM

or going long in DSLV.

bluelobster · April 23, 2014 6:32AM

Good point, I'm sure many would expect DSLV to be up a up a lot over the same time frame. Of course they will tell you they are just for short day trades, but unfortunately many get sucked in to the fantasy of 3x leverage. Long or short, any index, equity or commodity, the only way to make money in the longer term on these is short them on rips and hang on.

It's a guaranteed money maker, the major problem is the volatility requires deep pockets.

derryb · April 23, 2014 7:31AM

or flip flop with USLV and DSLV for short trips.

Overdate · April 23, 2014 7:40AM

<< 930% gain >>

More like a 90% gain. The most you can gain on a short sale is 100% if the financial instrument you are shorting goes to zero.

rawteam1 · April 23, 2014 8:19AM

<< 

<< 930% gain >>

More like a 90% gain. The most you can gain on a short sale is 100% if the financial instrument you are shorting goes to zero. >>

The way to make more than 100%, is to short by going long...

hchcoin · April 23, 2014 8:26AM

Maximum return on a short sale example

rawteam1 · April 23, 2014 8:36AM

<< Maximum return on a short sale example >>

Lol...

bluelobster · April 23, 2014 10:56PM

<< 

<< 

<< 930% gain >>

More like a 90% gain. The most you can gain on a short sale is 100% if the financial instrument you are shorting goes to zero. >>

The way to make more than 100%, is to short by going long... >>

Whoops, My ciphering was off, I inverted the return

I was looking at it as you short $100,000, you cover with 10,750, in essence, the return on actual capital spent, which is multiples of 100%

hchcoin · April 24, 2014 10:09AM

<< 

<< 

<< 930% gain >>

More like a 90% gain. The most you can gain on a short sale is 100% if the financial instrument you are shorting goes to zero. >>

The way to make more than 100%, is to short by going long... >>

I have never heard this before. Can you explain it to me or give an example?

Thanks

rawteam1 · April 24, 2014 12:18PM

Hch,
Thanks for asking, bear with me, I'm sure u know this strategy, most probably do...

I will use a general example, with general numbers just to make it easier to understand...
Edit to add this line, although numbers aren't exact, they are indicative to actual prices ...

We will use slv as the underling example and April 2011-third Friday of December 2011...

Eerily, as the silver price was ramping upwards in price weekly, a significant time before 4-24-2011, there was seemingly unbelievable report,
This part is true and I'm using the info for this example, the report was there was a huge buy of a slv 25 put contract, this as silver going thru 35,36,38,40... These are things I personally look for as the major plays for the most part aren't done for pissin money away... This was an amazing position and I'm sure most if not all who payed attention or didn't would have said it was a sure loser, impossible slv from 45-47 to 25 in a month,2,3,6...

Well there are many different scenarios, lets look at a few...
Slv trading at 40-45 in late April, one buys(or goes long) a June 35 and June 30 put(short) option...
Paying about .15 cents for the option to sell 100 shares of slv at 35 and .05 cents to sell 100 at 30...
So lets say one bought 100 put options(went long by going short) of each, cost 100 contracts x 100 shares (each contract represents 100 shares), so cost $1500 plus $1000...

At some time before the expiration date (3 rd Friday of the month), one must close the position or if your position is worthless (slv stays at $40) it will expire, one could have closed at differing times by selling lets say when slv was $34.40 on may 13,
The 35 put prolly could have been sold in the $3-4 range and the 30 put at .75 plus...

Thus if u sold all your 35 options that you went long, at $3, you would have received $30,000(100x100x3),
Thus shorting slv by going long produced a huge return...

Now common folk are taught options are risky blah, blah blah, I guess to an extent they are, but there is a predictable risk of capital, it's is how much one buys is your max loss, unlike shorting of stock which in theory has unlimited risk...
And with calculated risk, my own personal opinion is this is the only way to "play" the market for significant gain and or hedge, as any phyzz holder, could have and should have hedged their position for virtually nothing...

hchcoin · April 24, 2014 12:40PM

rawteam1,

Thanks for the example. Makes sense using a put option. I thought you were talking about selling "short". The beauty of buying a put option is your only risk is the premium and I agree buying an out of the money put option at such a low premium is really not a risky strategy when you have so much time value as in your example.

jmski52 · April 24, 2014 12:57PM

Options aren't the only financial vehicle that's risky. Everything is risky. It's only a question of magnitude. The problem I see with hedging is that you automatically end up with a full time job juggling paper positions. Why not just improve your marketability and work a career for financial gain? It's all this reliance on leverage and speculation on the Bernanke put that's got us into this bind. Well, that and government largesse & spending in multiples over what anybody's actually produced. It can't go on forever.

Doesn't it seem, and I say this without empirical evidence - that when bond yields drop through the bottom, everyone scrambles for leverage and takes more unwarranted risks, instead of putting values where they realistically ought to be? The Fed simply isn't going to allow deflation. Interesting times.

rawteam1 · April 24, 2014 1:55PM

Interesting, I guess my point would be hedging a phyzz stack one wouldn't sell, only at extreme overbought points(slv, great example)...
Hence in a matter of months or less, all phyzz was all free...

Also buying calls at extreme oversold conditions(BP, Monster beverage, examples), one can make a year or 2 of $$$ in one position, the opportunities are far and very few in between, so over the years I have learned the art of patience & still have a long way to go...

But these are leveraged opportunities using calculated risk, and are given up by the market as an opportunity for all, but im sure a few take advantage..

jmski52 · April 26, 2014 4:54AM

in a matter of months or less, all phyzz was all free...

no, no, no............there are no guarantees. Of course, some speculators are more successful than others. That's what makes a market, usually (unless the Fed or JPM or GS or HFT are involved.)

Also buying calls at extreme oversold conditions(BP, Monster beverage, examples), one can make a year or 2 of $$$ in one position, the opportunities are far and very few in between, so over the years I have learned the art of patience & still have a long way to go...

But these are leveraged opportunities using calculated risk, and are given up by the market as an opportunity for all, but im sure a few take advantage..

The use of leverage is to amplify a position. There is no mitigation of risk by calling it a "calculated risk". Every position is a calculated risk, even a 1 oz silver bar. Every calculated risk can turn against what you thought when you took the position.

rawteam1 · April 26, 2014 5:21AM

ahh but there is, since in my example, one could have shorted 10000 shares of slv, for $400,000-$475,000,
or as in my example shorted 10,000 shares of slv, by going long via put options for $1500, and the only risk is $1500...

jmski52 · April 26, 2014 6:34AM

ahh but there is, since in my example, one could have shorted 10000 shares of slv, for $400,000-$475,000,
or as in my example shorted 10,000 shares of slv, by going long via put options for $1500, and the only risk is $1500...

Yes, but you are risking 100% of your $1,500 bet which means that you have to be 100% correct to finish in the money. If you are wrong, then you have to double down to break even, not a lot different than in blackjack.

Alternatively, I could also choose NOT to risk $400,000 and thereby I would have mitigated the risk by failing to lose the $1,500 as well.

The risk is there, and you can't rationalize it away. It's only a question of degree and of leverage.

Hey, I'm not against risk. Holding physical metal and avoiding the stock market is a crazy risk for some people.

rawteam1 · April 26, 2014 6:41AM

<< It's only a question of degree and of leverage. >>

thus its c-a-l-c-u-l-a-t-e-d, lol, sometimes i wonder y i bother...lol

hchcoin · April 26, 2014 10:17AM

I thought it was a great example using the put option. Go look up out of the money SLV options on the CBOE. They cost hardly anything per share. If you follow these out of the money put and call options for long periods of time, you would recognize when a large market maker made a significant purchase because the volume for the out of the money option would be huge compared to previous levels. This is not some small investor making a huge gamble because the volume is so large it has to be "smart" money. It also can't be hedging because hedging is done on a daily basis in the market and that is what makes up the normal volume. When you see that abnormal signal, follow the smart money and buy an out of the money put or call option to follow. These things don't happen every day or month but they do happen in a manipulated market with large players when the market is changing directions long term.

Right now silver has been dropping for 3 years from a high near $45 per ounce. If you start to watch the out of the money call options daily, you will start to get a feel for the normal volume levels. Once you see a huge purchase for out of the money call options, this is a signal that institutional (so called smart money) money is making a play for an increase in silver prices. If you believe the metals market is manipulated by large players, this is your sign! The only risk you are taking is the small premium per share on the out of the money call option versus going long which is quite costly and carries risk as well.

This strategy would take patience and time to become familiar with SLV volume levels but the payoff could be huge as in rawteam1's example.

Some call this risk. I call this "smart" investing with very little chance of loss but a huge chance for abnormal returns. You only need this strategy to work 1 time and it would pay for 10 times when you were wrong and then some!

rawteam1 · April 26, 2014 11:00AM

what???..lol

hchcoin · April 26, 2014 11:17AM

<< HCH

what u want to look for is open interest abnormalities... >>

I wish I would have been short this the last 2 and a half years

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