does anyone trade silver options?

chrissilver

chrissilver

Member
Silver Stacker
I was thinking about starting to trade silver options, and was wondering if anyone on this board already does.

I don't really know anything about it, but was thinking that it would be a good risk to reward trade using leverage.

Buy a contract at a strike just a little out of the money, and that had the longest expiration date, somewhere just under 5 years away, and hope that silver goes a lot higher and that I can sell when silver is at $40 an once. As I think it has a good chance of reaching this level within the next 5 years. Or at least getting near.

Like I say I think it would be a good risk to reward ratio. I am young so even if I compeltly lost out on this trade it wouldn't be the end of the world, and it has the possibility of growing my net worth by a substantial amount.

Anyone have experience with silver options?
 
woah....thats gutsy investing....leveraging is risky stuff. I am too much of a pussy for that kind of strategy.
 
tolly_67 said:
woah....thats gutsy investing....leveraging is risky stuff. I am too much of a pussy for that kind of strategy.
Click to expand...

But it's Options. The maximum amount I will loose I will know before.
 
chrissilver said:
I was thinking about starting to trade silver options, and was wondering if anyone on this board already does.

I don't really know anything about it, but was thinking that it would be a good risk to reward trade using leverage.

Buy a contract at a strike just a little out of the money, and that had the longest expiration date, somewhere just under 5 years away, and hope that silver goes a lot higher and that I can sell when silver is at $40 an once. As I think it has a good chance of reaching this level within the next 5 years. Or at least getting near.

Like I say I think it would be a good risk to reward ratio. I am young so even if I compeltly lost out on this trade it wouldn't be the end of the world, and it has the possibility of growing my net worth by a substantial amount.

Anyone have experience with silver options?
Click to expand...

jparrie trades them and does well.
I have traded them in the past, but use other methods now.

My advice (merely advice) would be to steer clear if you know nothing about them.
Firstly, I doubt you will find an option dated 5 years out. But if you did, the theta on such a long dated option will kill you - there is no way that would be a good risk:reward trade. If it was that easy, every one would be doing it.
Learn about option greeks, then rethink your strategy.
 
wrcmad said:
chrissilver said:
I was thinking about starting to trade silver options, and was wondering if anyone on this board already does.

I don't really know anything about it, but was thinking that it would be a good risk to reward trade using leverage.

Buy a contract at a strike just a little out of the money, and that had the longest expiration date, somewhere just under 5 years away, and hope that silver goes a lot higher and that I can sell when silver is at $40 an once. As I think it has a good chance of reaching this level within the next 5 years. Or at least getting near.

Like I say I think it would be a good risk to reward ratio. I am young so even if I compeltly lost out on this trade it wouldn't be the end of the world, and it has the possibility of growing my net worth by a substantial amount.

Anyone have experience with silver options?
Click to expand...

jparrie trades them and does well.
I have traded them in the past, but use other methods now.

My advice (merely advice) would be to steer clear if you know nothing about them.
Firstly, I doubt you will find an option dated 5 years out. But if you did, the theta on such a long dated option will kill you - there is no way that would be a good risk:reward trade. If it was that easy, every one would be doing it.
Learn about option greeks, then rethink your strategy.
Click to expand...

Thanks for your advice of keeping clear, but I am not going to listen :D I am going to do some research into this properly, and then see if it would be possible to make a trade that has a good risk to reward ratio.

You might be right about futures with long expiry dates having premiums that are too high and not being a good risk to reward trade: But I will need to look into it and work out the math.

What other alternatives would you recommend to benefit from the (speculated) increase in silver over the next 5 years apart from buying physical silver or slv shares?

I like the idea of options as the maximum loss is known before hand, and you don't have to have a stop loss to do this, price could drop below to where a stop loss might have been set if trading.

I could trade futures perhaps? I think silver also trades as mini futures? But I would have to make sure that I did not over leverage myself and also work out if any additional funding would be needed if prices dropped and a margin call was made. Trading futures without some form of leverage seems a bit of a waste of time, unless you know the price is going to rise yet don't have all the capital to pay now.

I like the idea of options, so that I can increase exposure, yet know my maximum loss. I want to put a certain amount down with the assumption that I could possibly loose it all, or make a rather large gain.
 
Strike price $20. Expiry December 2014. Premium $15,510.

Profit if price went back up to $25 per oz before expiry would be $9,490. For me seems too risky, and contract size is too large.

I would have liked a 3-5 year expiry with a risk reward 1:10. But I think I was dreaming when I thought of these numbers. Like wrcmad said, If it was that easy, every one would be doing it.
 
Hi Chrissilver, yes I trade both, options and futures.

I started off very much like yourself many years ago by just buying puts or calls and praying that I was right, which quite often I wasn't. Then I foolishly ventured into writing naked options. I did very well for quite a long time and thought that I'd found my holy grail - then one night lost $30k. Ouch.

Now I take a much more placid view of options, mainly selling spreads and using good old time value to earn my $$$. I will occasionally just buy a long dated call or put, but I'd have to be fairly convinced that a move was imminent in order to do that. I recently jumped into USO calls when oil broke through $100 so that is doing well, so far anyway. Now I'm in profit I have two choices, simply sell or sell a call higher up the ladder to protect some gains. I think oil is going higher so I may do the latter. (Now watch it plummet!)

You won't find a market much more than about 12 months out to expiry, and if you do you'll pay for it.

Futures is a very different beast and we've discussed it elsewhere on these forums. I'd stay away if I were you. Talking of which the market opens in about 3 minutes so I'm off to lose some more money...
 
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