What do you guys think of using ZSL as a hedge against a possible fall in silver prices (thereby a fall in coin prices)? I have used it the last couple times when Silver got around $44 and it seems to be a pretty good deal.
The time decay on ZSL is extremely high. I calculated that it has fallen over 30% in the last 6 months even taking into account the change in silver price. My expectation is that ZSL will be -0- by 2013. ZSL is a short term trading vehicle only.
Right but when you have a lot of silver it helps you to "lock in" a position without having to worry about a down turn. Also it allows options, adding an interesting dimension. As for going down of course it has been going down... it goes the opposite way of silver (or is at least designed to). But when we get spikes ($50, $45) it comes in handy I think, especially if you are dollar cost averaging instead of timing.
ZSL started the year around $40 and silver started the year around $30. Silver is up 3% ytd, so ZSL should be down 6% ytd. Yet ZSL is down $25 or 62%. It is ok for very short term trading/hedging, but it is very dangerous to hold ZSL for more than a few days. ZSL is rapidly heading to -0- and I suspect many other derivative products are going to do the same.
If you use silver as an inflation hedge, then to hedge your silver holdings, use bonds as a deflation hedge.
