I tried to short silver.

L

LaramieHirsch

New Member
Hello. New here. New to silver market. Doing my best to learn all I can. Parabolic. COMEX. Margin adjustments. Words like that.

Quite new.

In any event, I bought a good amount of silver at around $15. I'm doin' good, even though we're floating around $35 right now.

However, I did something stupid.


On a Wednesday night, I saw silver dropping like a rock. I saw it at $41 an ounce. I decided to try to short it, because I had read it could go down into the upper twenties.

By the time I made it to my local dealer the next morning, it was down to $37. His fee for selling silver was $2 above spot.

This means I got $35 an oz. for my silver.

I was an idiot for doing that. (I thought I could re-buy at a low price and increase my silver holdings.)

To buy back silver, I'll be charged roughly $3 over spot.

So...to break even, I need silver to go down to $32 an ounce.

I'm still hoping it'll go down to upper twenties, but that hope fades with every week.

My question: WILL SILVER GO DOWN TO $30 OR UPPER $20s?

Here's some plans I've thought about: Holding my cash and waiting until August. If it doesn't go down to what I need...just get out of the market and pay off a credit card.

Or, accept the loss from the fees, and get back into the silver game.

Thoughts?

-Laramie
 
Hi Laramie,

Will it go down further - probably not at this stage - and certainly I wouldn't 'wait' for it if I were in your shoes.

When people short silver they usually mean in terms of margined accounts or CFDs where you 'play' against the spot price with only very small contract margins. What you tried to do with physical silver usually results in what has now happened. The start and stop overheads mean you need a huge move to make any cash.


I suggest you just repurchase as soon as possible. Ride down any further down moves and ride up the coming rebound.
 
What trading vehicles are you using? I assume if you need to contact your dealer this is not via a CFD or futures contract.

If you have physical positions you can use your short position as a hedge aggainst losses.

As far as where the price is going i'm not so sure, i suspect around todays prices we might see some buying and subsequent gains and then another sell-off like last week.
 
Turk said:
Hi Laramie,

Will it go down further - probably not at this stage - and certainly I wouldn't 'wait' for it if I were in your shoes.

When people short silver they usually mean in terms of margined accounts or CFDs where you 'play' against the spot price with only very small contract margins. What you tried to do with physical silver usually results in what has now happened. The start and stop overheads mean you need a huge move to make any cash.


I suggest you just repurchase as soon as possible. Ride down any further down moves and ride up the coming rebound.
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Any other folks share this opinion?
 
LaramieHirsch said:
Turk said:
Hi Laramie,

Will it go down further - probably not at this stage - and certainly I wouldn't 'wait' for it if I were in your shoes.

When people short silver they usually mean in terms of margined accounts or CFDs where you 'play' against the spot price with only very small contract margins. What you tried to do with physical silver usually results in what has now happened. The start and stop overheads mean you need a huge move to make any cash.


I suggest you just repurchase as soon as possible. Ride down any further down moves and ride up the coming rebound.
Click to expand...



Any other folks share this opinion?
Click to expand...


I would suggest you look at this advice as well, if you do indeed decide to buy it back i would look into CFD's for shorting in future as the margin req will be much lower and you can get in and get out much faster.
 
I'm waiting till "lower than 30" to buy.. Might be a bad idea but it's my plan & I'm sticking to it.
 
Unless you need to liquify for something else I wouldn't sell at the moment the market is very volatile since the virtual silver market margins increased.
 
There are 3 certainties in life;
Death
Taxes
and the fact that everything will cost more in the future.

There's less risk investing in the rising price over the longer term than gamblimng on short term price fluctuations
 
Clawhammer said:
There are 3 certainties in life;
Death
Taxes
and the fact that everything will cost more in the future.

There's less risk investing in the rising price over the longer term than gamblimng on short term price fluctuations
Click to expand...

But to be fair everybody has different investment strategy's if your using leverage short term fluctuations can produce larger profit than long term gains but that said the risk is greater especially when your using leveraged products.

If your a large corporation in the u.s like General Electric i'm not so sure if taxes are certain lol :-)
 
I'll put in one vote for paying off that credit card.
If you're going to wait anyway, might as well save some credit card interest. If silver gets to a price you like, you obviously have the option of using the card to buy some.....
Or you might enjoy being debt-free enough to hesitate, before deciding to hold silver in one hand and debt in the other. ;)
 
Ag-ness said:
I'll put in one vote for paying off that credit card.
Click to expand...

I'd like to pay off the credit card, but I don't quite have the full amount to pay off the card.

But I do have enough cash to substantially profit enough to pay it off and maybe have some left over.



Okay, so, I told you I sold all the silver. It was $2 over spot when I sold it. It'd cost me about $3 over spot. I have enough to buy about 150 ounces...so it'll cost me almost $500 to get back my silver bars. WHY SPEND THIS MONEY TO GET BACK INTO THE PHYSICAL MARKET?

I was thinking that, since Silver Wheaton usually follows the price of physical silver, perhaps I can spend a mere $50 in stock broker fees and buy stock shares of Silver Wheaton, and follow silver's ascent in that manner. I would be back in the silver game, albeit not the physical silver. By the time silver reached $50 an oz. again, I'd have enough to pay of that credit card, for sure--as long as Silver Wheaton maintained the same pace it's displayed in the last two to three years of mimicing silver.

So....what do you guys think?

Follow silver with Silver Wheaton stock for $50? Or own physical silver for about $450?

(I'm wanting to cash in to pay off the credit card later this year or early next year, at the next silver peak. I could get back into physical silver after I raise enough to pay off that card. I think a 100% return with silver would clearly outmatch a 12% interest fee of my card.)

Thanks guys.
 
The benefit of physical silver is that there is no counter party risk and of course you can hold the silver as long as you want if you aren't buying it on credit.

Stocks on the other hand are more volatile and depend on the companies of the portfolio you are holding.

If you are banking on a 100% increase in return on Silver but risking 12% interest fee then you run the risk of being forced to sell your Silver before it reaches 100% increase to service your debt obligation to the CC company.

I wouldn't do it, but that's just me.
 
fishball said:
The benefit of physical silver is that there is no counter party risk and of course you can hold the silver as long as you want if you aren't buying it on credit.

Stocks on the other hand are more volatile and depend on the companies of the portfolio you are holding.

If you are banking on a 100% increase in return on Silver but risking 12% interest fee then you run the risk of being forced to sell your Silver before it reaches 100% increase to service your debt obligation to the CC company.

I wouldn't do it, but that's just me.
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Thank you, Fishball.

Forgive me if I'm slow here. I'm trying to learn here.

1. But how is there a "counter party" risk with buying SLW stock? What do you mean?

2. I'm not banking on a 100% increase on silver. Actually, just 30% more profit, and I'll be able to pay off the card. But I can afford to wait a while to pay off this card. It's not a RED ALERT emergency just yet. Does that make the situation more acceptable?

3. Why would you not do SLW stock in my situation? You would instead shell out $450?

Thanks again, Fish
 
LaramieHirsch said:
Thank you, Fishball.

Forgive me if I'm slow here. I'm trying to learn here.

1. But how is there a "counter party" risk with buying SLW stock? What do you mean?

2. I'm not banking on a 100% increase on silver. Actually, just 30% more profit, and I'll be able to pay off the card. But I can afford to wait a while to pay off this card. It's not a RED ALERT emergency just yet. Does that make the situation more acceptable?

3. Why would you not do SLW stock in my situation? You would instead shell out $450?

Thanks again, Fish
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Wikipedia said:
Counterparty risk, otherwise known as default risk, is the risk that an organization does not pay out on a bond, credit derivative, credit insurance contract, or other trade or transaction when it is supposed to.
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Basically if the company goes into bankruptcy or chapter 11 or whatever you're left being one of the many many many creditors and likely get nothing in return. There is no problem with physical, you hold it with no strings attached.

I guess if you see yourself gaining more by taking a 'risk' of 12% then go for it. At the end of the day if you believe you are going to make money then you should go for it assuming the level of risk is acceptable for you. Just make sure you don't use stupid methodologies like Value at Risk to determine whether or not you are going to invest in something.

In your situation I'm not sure what I would do, perhaps I might hedge my position by offsetting the shorts by going long on SLW but you wouldn't make much money that way. No risk, no gain.

Difficult choices you have to make, and nobody can really tell you what's going to happen but I believe that if silver price crashes due to a commodity crash then SLW will fall as well so it would be a good hedge in theory against your shorts.

(This is not financial advice, I have never invested in SLW or even looked at them in depth ;) )
 
Thank you very much for putting some thought into helping me figure this one out. I have a lot of thinking to do between now and the opening of Monday's trading day. What to do, what to do.


fishball said:
Just make sure you don't use stupid methodologies like Value at Risk to determine whether or not you are going to invest in something.
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What is a Value at Risk methodology?

-L.H.
 
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