Another round of smackdown is ahead for Gold and Silver

I'd actually also be interested in the pros and cons of shorting vs put options. Don't think this here was an attack, but rather an interesting discussion point and learning opportunity for beginners like myself.
 
Askari said:
I'd actually also be interested in the pros and cons of shorting vs put options. Don't think this here was an attack, but rather an interesting discussion point and learning opportunity for beginners like myself.
Click to expand...

I agree.. its an interesting alternative to achieve the same goal with a little risk mitigation.
 
Bump
I only trade in physical so can some one please explain to me how much Leon is down so far?
I assume he was betting that gold/ silver was dropping just before this breakout?
 
He would have sold the boat yesterday, and today taken out a 2nd mortgage on his house.. :P

No idea, if he had a reasonable stop he should have taken the loss by now.

Silver 'should' run up another couple of dollars.
 
SilverSale said:
He would have sold the boat yesterday, and today taken out a 2nd mortgage on his house.. :P

No idea, if he had a reasonable stop he should have taken the loss by now.

Silver 'should' run up another couple of dollars.
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maybe that's why we haven't heard his doom and gloom lately, the computer must have been repossessed
 
Askari said:
I'd actually also be interested in the pros and cons of shorting vs put options. Don't think this here was an attack, but rather an interesting discussion point and learning opportunity for beginners like myself.
Click to expand...
Here is my take in a nutshell -

Short selling:

Pros:
Less outlay for equivalent return.
Higher potential profit.
No greeks to worry about - ie, no time decay, no delta etc. to effect risk management or eat into profits when volatility rises (typical for a price-run, which incidentally is what you are looking for when trading)
Therefore much easier to risk-manage and (practically arguably) lower expected loss.

Cons:
Theoretically higher potential loss.

Buying puts:

Pros:
Theoretically lower potential loss.

Cons:
More outlay required.
Lower potential profit.
Greeks can effect profits or extenuate losses - ie time decay, delta etc. can effect risk management or eat into profits when volatility rises (typical for a price-run, which incidentally is what you are looking for when trading)
More difficult to risk-manage, therefore (practically arguably) higher expected loss.

Pros:
Theoretically lower potential loss.

Hope that clears it up. :lol:
 
Marchas45 said:
Jim we need to break thru the trend line which is $15.50 and the next resistance line is $16.50 and I believe we are going to crash right thru that. As you say" Just My Opinion" Lol Going to be one hell of a week. Keep Stacking

P.S. The Gold resistance right now is $1195.30 and if it breaks thru there then watch out. I did make it there today but was pushed back.
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It's $1,242.10 at time of this post.
 
leon1998 said:
Completed my silver short position today by adding last batch of shorts @14.9

My average cost sits about @14.7 per oz. We will see how things develop from here, with commercial traders on massive shorts. ;)
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Hang in there, kitten. I'll get help :P
 
Caput Lupinum said:
leon1998 said:
Completed my silver short position today by adding last batch of shorts @14.9

My average cost sits about @14.7 per oz. We will see how things develop from here, with commercial traders on massive shorts. ;)
Click to expand...


Hang in there, kitten. I'll get help :P
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I have respect for Leon and enjoy his analysis, but at this point I have to say his call was off. Hopefully he has covered his shorts, otherwise this upward trend (and more lost $$$ for Leon) may eventually cause him to soil his own shorts. :D

Jim
 
wrcmad said:
Askari said:
I'd actually also be interested in the pros and cons of shorting vs put options. Don't think this here was an attack, but rather an interesting discussion point and learning opportunity for beginners like myself.
Click to expand...
Here is my take in a nutshell -

Short selling:

Pros:
Less outlay for equivalent return.
Higher potential profit.
No greeks to worry about - ie, no time decay, no delta etc. to effect risk management or eat into profits when volatility rises (typical for a price-run, which incidentally is what you are looking for when trading)
Therefore much easier to risk-manage and (practically arguably) lower expected loss.

Cons:
Theoretically higher potential loss.

Buying puts:

Pros:
Theoretically lower potential loss.

Cons:
More outlay required.
Lower potential profit.
Greeks can effect profits or extenuate losses - ie time decay, delta etc. can effect risk management or eat into profits when volatility rises (typical for a price-run, which incidentally is what you are looking for when trading)
More difficult to risk-manage, therefore (practically arguably) higher expected loss.

Pros:
Theoretically lower potential loss.

Hope that clears it up. :lol:
Click to expand...

So, I disagree with some of these comments, but think the overall thought process is good.

You say a larger outlay for the puts than short selling, but that isn't true a put will always require less capital than the margin required to own/short a stock. That is why an option is leverage. For proof of this just look at any stock and the premium of the option (the caveat is if you go with a deeply in the money option, then you may get close to parity).

While the greeks matter vega actually works in your favor since it is a measure of volatility and volatility tends to go down as a stock rises and rises as a stock drops and remember you own the put so an increase in volatility increases your gains as the stock drops and decreases your losses as the stock rises. Owning a put and vega like each other.
 
The thing I use to determine option versus stock is solely time frame on the trade. If I am looking super short term like a day or 2 I use the stock itself. If between 1 week and 6 months I use options and if beyond 6 months I go back to stock. The reasoning is the greeks.
The greeks
delta- how much the option price will move with the stock. ex: delta=0.5 if stock moves up $1 option moves up $0.50.
gamma- how much the delta will change as the stock changes. (don't really care about this one maybe I should)
theta- how much the option price will change as time passes. ex: theta=-20.00 tomorrow if nothing changes in the world today the option will be worth 20 dollars less tomorrow.
vega- how much the option price will change per change in volatility ex: vega = 40.00 if volatility rises by 1 point the option moves up $40

If a short term trade want the delta close to 1 (underlying stock has a delta of 1)
If middle term trade want the leverage of an option and the limited risk it provides
If long term trade don't want to have theta looming over me.

Mind you I have only been trading options for about 2 years now, so still trying to learn all the tricks. This want to learn is what brought me to this site and to talk with other people. Thus, I can learn from others experience as well and hear where I have things confused.
 
Caneorange said:
The thing I use to determine option versus stock is solely time frame on the trade. If I am looking super short term like a day or 2 I use the stock itself. If between 1 week and 6 months I use options and if beyond 6 months I go back to stock. The reasoning is the greeks.
The greeks
delta- how much the option price will move with the stock. ex: delta=0.5 if stock moves up $1 option moves up $0.50.
gamma- how much the delta will change as the stock changes. (don't really care about this one maybe I should)
theta- how much the option price will change as time passes. ex: theta=-20.00 tomorrow if nothing changes in the world today the option will be worth 20 dollars less tomorrow.
vega- how much the option price will change per change in volatility ex: vega = 40.00 if volatility rises by 1 point the option moves up $40

If a short term trade want the delta close to 1 (underlying stock has a delta of 1)
If middle term trade want the leverage of an option and the limited risk it provides
If long term trade don't want to have theta looming over me.

Mind you I have only been trading options for about 2 years now, so still trying to learn all the tricks. This want to learn is what brought me to this site and to talk with other people. Thus, I can learn from others experience as well and hear where I have things confused.
Click to expand...

I hear ya dude. I'm in the same boat. Lately, I've been wanting to explore buying put options because of this very thing. I could theoretically "sell" at the current price for cents on the dollar and exercise if it did drop, otherwise let it expire if it goes past the time frame and does not move or goes up.

The only thing I'm still getting used to is making a spread and being in the money. still trying to figure that stuff out, but I appreciate your contribution.

I think i like to buy puts or buy calls on the opposite end if I think its going up which would've been nice a month ago.
 
Caneorange said:
You say a larger outlay for the puts than short selling, but that isn't true a put will always require less capital than the margin required to own/short a stock.
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Maybe in the good old days.
Now days, that isn't true, as there are better ways to short.
Since such instruments as CFD's came to the party, you can short on as low as 0.5% margin.
Caneorange said:
While the greeks matter vega actually works in your favor since it is a measure of volatility and volatility tends to go down as a stock rises and rises as a stock drops and remember you own the put so an increase in volatility increases your gains as the stock drops and decreases your losses as the stock rises. Owning a put and vega like each other.
Click to expand...
I see where you are coming from, but that is best-case scenario.
Buying theta puts you behind the 8-ball on any options trade from day 1 - it's a premium you can't get back.
Volatility makes risk-management of options difficult at the best of times, and if you can't risk-manage as effectively, then it follows that it is more risky - this is how I have experienced it.
 
So, CFD's are completely different than stocks and options on stocks. These are going into the futures markets and that is about the extent of my knowledge in the futures market. I have also made 0 trades in the futures market. CFD's just sound like leverage to me. If I went to my bank and got a loan and bought my put option I would have $0 invested, but tons of leverage.


Please correct any of the following that is not right based on the above statement (0 experience in futures).
I can see how if you have 0.5% on margin your cash outlay would be lower, but now you are leveraged to a ridiculous amount. If I did $100 at 0.5% margin I have thus $20,000 at risk and if I am wrong even slightly the loss will be huge. The reverse for the gain would be equally true. I try not to do any trade that could wipe me out and this type of thing could wipe me out very quickly. How would you manage that risk?

I would also love to hear more about CFD's and how to trade them.

Again 0 knowledge in the futures world. Sorry if none of this information is correct.
 
serial said:
Bump
I only trade in physical so can some one please explain to me how much Leon is down so far?
I assume he was betting that gold/ silver was dropping just before this breakout?
Click to expand...

Impossible to say without knowing how many shares he shorted and the exact prices. But I would guess only 10%. He hasn't bought the farm in any way shape or form at the current price.
 
It's impossible to say without knowing 1. The option expiry date, 2. Strike price, 3. The number of options purchased, and 4. The underlying EFT.

Typically with options you risk the entire amount. So if I purchased 4 Mar 2016 SLV PUT options with a strike price of anything <= $14.50, I would be currently down about ~90%. I would need the price to drop significantly below the strike price in order to make any gain.
 
Honestly, I am looking for at least somewhat of a retracement of this run to buy more.

I did buy before the jump, and even with margins & premiums, I am completely in the green now across my entire metal holdings.
 
Caneorange said:
So, CFD's are completely different than stocks and options on stocks. These are going into the futures markets and that is about the extent of my knowledge in the futures market.
Click to expand...
CFD's do not resemble futures one little bit, and they are not options.
They are in fact exactly like stocks - and even pay the dividends - they are like a very leveraged margin loan.

Caneorange said:
Please correct any of the following that is not right based on the above statement (0 experience in futures).
I can see how if you have 0.5% on margin your cash outlay would be lower, but now you are leveraged to a ridiculous amount. If I did $100 at 0.5% margin I have thus $20,000 at risk and if I am wrong even slightly the loss will be huge. The reverse for the gain would be equally true. I try not to do any trade that could wipe me out and this type of thing could wipe me out very quickly. How would you manage that risk?
Click to expand...
Why would you put on a leveraged trade that could wipe you out? That is insanity.
Just because you can access leverage doesn't mean you have to extend yourself as far as you can possibly afford - that is for Gen-Y first-homebuyers in Sydney. :lol:
Why not just outlay $5 for $1000 exposure?
No time premium, no greeks, no brokerage fees, no reduction in potential profit,... and the remainder of your cash parked outside any brokerage house or dealer.
Risk is managed through automatic stop-losses, and you can opt for guaranteed stops if you like.
 
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