silver
- Thread starter DanielQ
- Start date
for all u dudes that wish to buy precious metals on the cheap...what u can do is sell naked put options on silver or gold futures...if silver is at $34 right now and u feel comfortable buying at $30...sell naked puts and if silver drops that low...u now have the option to buy silver at that price...if silver doesnt drop...u keep the option premium...this is the best way to get a deal without losing...the same goes for stock...I bought some APPLE this way a few years ago...u may need a 25k trading account tho...cant remember what the limit was/is
You do understand that if it drops from $34 to $30 you lose the $4 per right? And when it comes to futures contracts that is a substantial sum.
When you are doing this with Apple you were doing this on the stock and not in the futures markets which is where they trade commodities like silver. Unless you stay in the stock market and sell against an ETF or equivalent.
Most accounts will not allow you to sell naked puts unless you have the amount equal to the potential loss in the account in the first place.
Remember - the guy that buys the put from you is betting the ETF or Futures contract wil be going down. If he is right then you keep the premium but you owe him the amount it dropped. If he is wrong then you keep the premium and you walk, once the contract has expired.
This is a great way to go broke, fast, unless you really know what you are doing.
Thanks leadsupplier and conv3rsion.
I am a gold buyer, but this thread stoked me to look into Silver. And took the plunge. Sure looks like a bubble now, but I bought Physical bricks, as I do with gold, so I will be keeping them for my yet-to-be-born Kids' education
Do you always buy demat like securities, or do you buy physical Silver. The Mark-up was killing me, but that is price retail consumers buy anyway, so I thought why the hell not.
I am a gold buyer, but this thread stoked me to look into Silver. And took the plunge. Sure looks like a bubble now, but I bought Physical bricks, as I do with gold, so I will be keeping them for my yet-to-be-born Kids' education
Do you always buy demat like securities, or do you buy physical Silver. The Mark-up was killing me, but that is price retail consumers buy anyway, so I thought why the hell not.
You have the option to exercise the purchase on or before the expiration date of the option. You do not keep the option premium as the value errodes over time if silver does not go in the direction you want.
If silver does not go the way you are predicting before expiry, you then lose 100% of your investment. It's just another complicated form of leverage...
i didnt explain it more in detail...but this is how it works...if silver is at 34 and u want to buy at 30...u sell the 30 naked put...when silver drops u get the option to buy it...if it doesnt then u keep the option premium and get to do it all over again the next month or how ever long u bought ur options for.
if u sell the 30 put and the silver futures options are above 30 by expiration....u get to keep the premium you took in and you can sell them all over again the next month...also i did mention there was some account prerequisites to doing this...so if u have the money and ur looking to buy in a sure shot manner...this is the way to do it.
silver is really a pretty thinly traded market compared to something like the s&p. better watch that open interest if there's a big sell off and you're getting close to expiration. i wouldn't recommend options to someone i had to explain them to. stocks are much more forgiving.
there's plenty of opportunity to profit in stocks without the lose-it-all risk of options. the only time i can think of when i might buy options is like at a major low in july 2009 where i'd buy SPY (or 2x S&P) options a year out.
and if silver is at 25 on expiration you lose 5, how many dollars that calculates out to, I am not certain because I am uncertain how much a silver futures contract is worth. But futures contracts are usually a lot more leveraged than, say, a silver ETF.
That was my concern. Unless you are doing a spread. Using the premium from the put sale and hedging it with a put purchase further out of the money....
As for thinly traded. I have been caught in thin markets before - if this is a thin market then watch out. You can get crushed with no exit unless you buy in with insurance like the spread above.
Better to just stay away from naked selling unless you are a serious player.
the point of mentioning the naked put was for individuals who dont want to pay the current price for silver...obviously they would sell the put at whatever strike they feel the silver is worth to them (hopefully they arrived at that target thru some type of research)...if silver drops to 25 but they bought at 34 instead of at 30 then they would have lost 9 bucks instead of only 5...if u know options trading...u know its not a matter of if u can make money...its a matter of how u manage the losses...also i didnt mention spreads because they are expressing interest in actually owning the silver/stock...the spread would be a pure premium play, although i dont think they would be mad with the income, that was not the intended purpose...personally, i dont know the silver futures market so i dont know how liquid that market is...but i didnt want to get too technical in my post (vol skews, greeks, open int, etc)...i just wanted to put the idea out there and allow them to further research it if it appealed to them.
fair enough. I get real "geeky" when discussing options like programmers do when discussing code - and I forget the context.
thats cool...maybe we can discuss stock screening strategies...with the vix being all wacky the past few years...i have confined my trades to the same basket i started with (iwm, rut, ndx, spy, dia for the indices) and aapl, goog, stra, rimm, vlo, fto (plus 2 or 3 others) on the individual stock side.
since u said u get geeky...i assume ur a technical guy and i could definitely sharpen my sword in that area...i mainly use historical price/vol, IV, vol skews, the news to enter a trade and manage by the greeks from there.
thats excellent...that means the put premiums are a bit juicier...now just pick a lower strike that you think u want to pay for silver and sell the put...the market will help finance ur purchase :small-smiley-026:
