Hello Stackers, From what i have been seeing ( 3 month silver graph & 1 yr silver graph ) plus all that i have been reading, plus all my biases,feelings,hunches and stacks of bullish reports read about physical silver. I think this is ( as in NOW IN TIME ) is a perfect Opportunity for a STRADDLE on the price of silver to be established. ( to those who dabble with options contracts on the silver price ). A STRADDLE profits to the one who buys it if the SPOT makes a LARGE move in EITHER direction. ie. ud cover for example SPOT +- 10% - so if price of silver finishes at ie; SPOT now $29.15 ( 10 % = $ 2.915 ) so the straddle of $26.24 - $32.06. Now to establish this position, money would be needed and lets say the cost was $3k Now if price of silver DOES STAY WITHIN THE SPREAD OF $26.24 - $32.06 than my options would expire worthless and id be down in this example $3k. But if price is lower than lower range of straddle or higher than higher range than the increase would substantially be larger - at least $20k and the larger the move of SPOT from my straddle range the larger the profit would be. exact profit amount and cost of position can be calculated by getting some stuff of the net, but thats outside of the scope of this post, nor am i planning to do such a thing, as dont have ze money for that style of 'fossicking'. Just thoughts
It's already hard enough to make money by going plain old long. Why bother with this sort of speculation. If something is undervalued just buy the damn thing. No need to over-complicate things or add an additional layer of risk when its already risky.
greed makes people not use the plain old long method anymore. im not saying im gonna go ahead and do it, but had i had access to some nice cash prior to GFC id definately have dabbled with this. and dabbling in this on a world scale has brought us here in the first place.
I am currently learning about stock trading (ASX) and havent come across that term yet.... straddling? Is there any resources out there that can outline this strategy in a little more detail to those of us that are trying to learn more? Preferably online? Cheers
Straddle is used in Options trading ( Derivative instruments, whose prices depend on the underlying SPOT prices, the books say, used by hedgers and speculators - reality, they are all speculators) You would be entering the market in a levereged position and losses as well as gains would be magnified. Check out http://en.wikipedia.org/wiki/Straddle The Barings bank collapsed due to a rogue trader SELLING straddles on the Nikkei 225 Index, ( he was betting that the price WILL STAY WITHIN THE RANGE, which normally should happen if due diligence on the underlying is not to violently react with price in either direction, so had the Nikkei traded within the range Barings would have collected the premiums paid from the Buyers of those straddles ( those who bet $3k that nikkei wouldnt stay in that range ) What happened, and what Nich Leeson ( the rog tr) didnt see in his due diligence is an Earthquake that hit in Kobe, the index fell and he SOLD the straddles. He was caught short and the Barings bank didnt have enaf money to pay it all out, and collapsed. Thats as if you were a king and were walking down the street in your kingdom and some 8yr kid kills you by mistake I have a great book on Derivatives that i bought in Singapore on the airport ( was caught with some Singaporean $ on my flight back to Oz, and had to get rid of it somehow.) Look up options, study and know what a CALL is and what a PUT is, get a feel for what it really means to sell a call or buy a call. when you learn the building blocks, than you can look at composite synthetic positions that can be built from the basic blocks. Straddles, butterflies, Condors, etc ( those are the fancy named ones, others are plain ) The introduction of Calculus ( study of rates of change ) to the world of Finance, heralded the ability of banks to print more and more money into the system, and with it its users are sucking out whats in the underlying and making the underlying ever more expensive to all the other users. Example: Derivatives in the mechanical world Distance : m - underlying Speed : m/s - derivative with respect to time Acceleration : m/s^2 or (m/s)/(s) - derivative with respect to 'new' underlying - speed in this example Jerk : m/s^3 its when 'acceleration' changes in time "jerk" - mostly used in 'nerdy' theoretical projects by physicists. Derivatives in the financial world SPOT : $/share ( can be used for stocks,commodities, interest rate products, whatever ) Option : $/contract (option to buy or sell underlying at future date at presently agreed price - its an option ( thus involves time thus rates of change very handy to use prior to 'pouncing') Futures : $/contract delivered at a future agreed date Now if you can measure the distance,speed and acceleration of a car, and transform that knowledge into finance ( check econophysics in wiki ( wikipedia, not wikileaks ) than you can use that knowledge and look for other variables. Finance has long evolved. The amount of money changing 'hands' in the world of derivatives trading, DWARFS amount of money in the spot/underlying economy.
Ummm let me decipher all that for you:- 1. If you think Ag is going to rise in price greater than any other competing investment you are aware of, you BUY. 2. If you think Ag is going to rise less than a competing investment or go down in price, you SELL. Pretty much it isnt it ?
Immm Math was never my strongest subject, think I'll just stick to the silver raries, that way I can't really lose.
It seems we may be at/near another point in time where this strategy might be worth considering for those bold enough to try it? I don't fit in this category (I'm only slightly crazy) but found this thread after a google search when trying to learn what straddling is after seeing it mentioned on Clive Maund's site in a recent premium members link titled "THE GREAT PRECIOUS METALS SECTOR STRADDLE OPPORTUNITY..." I'm not a premium member of his site but the link alone was enough to make me curious as to how you'd saddle this pony up and straddle it! Now I've read this post I can see why it might possibly be a suitable time for this style of gamble - even a newbie like me can see that in the very near future there seems to be a fair chance silver might make a significant move in one direction or the other...
the straddle trade is appropriate if: 1. If you think the volatility of Ag is going to rise you BUY the straddle. 1. If you think the volatility of Ag is going to fall you SELL the straddle
