below is a small part of Steve Saville's latest newsletter - http://www.speculative-investor.com/
mods: please delete if not appropriate, but i think the information is good for forum readers, as well as giving credit to the author, who runs a paid newsletter that i subscribe to. i have nothing to do with the author or newsletter.
-- Weekly Market Update for the Week Commencing 21st February 2011
Silver Scenarios
In the 14th February Weekly Update we said that silver was poised to make a big move over the weeks ahead. We went on to say that we expected silver to drop back to the low-$20s during the first half of this year, but as a result of the preceding week's new multi-year high in the silver/gold ratio we wouldn't be surprised if it moved at least a few dollars above its January peak before commencing a substantial correction.
Silver was strong last week and broke out to a new multi-decade high. This doesn't change our expectation that it will trade in the low-$20s during the first half of this year, but it does enhance the prospects for a big move over the weeks ahead.
We suspect that silver will soon commence a $10 downward correction OR that it will gain $8-$10 over the next several weeks before embarking on a $15-$20 downward correction. It's an interesting situation, and -- for information purposes only -- this is how we are dealing with it in our own accounts:
We are well covered against the latter scenario because an $8-$10 surge in the silver price would certainly be accompanied by a lot of strength in gold and in gold/silver equities (especially the junior gold/silver equities). Under this scenario we would be gradually selling all the way up, most likely increasing the cash percentage in our accounts from the current average of 35% to at least 50%. However, apart from already having a sizeable cash percentage we weren't, prior to last Friday, covered to the extent that we'd like against the former scenario. We obtained the desired coverage on Friday via the purchase of July SLV put options.
Our plan is actually a little more complicated than outlined above due to the fact that even if silver is about to embark on a multi-week surge to around $40, it could first pull back to the high-$20s (a 4-8 day pullback would be normal following the quick rise of the past three weeks). Having just bought some put-option insurance, we plan to boost our exposure to the long side by purchasing some SLV call options if (and only if) silver drops back to around $29 within the coming fortnight.
The above is as specific as we are going to get with regard to our own short-term trading tactics. This is mainly because we don't want to encourage anyone who is not already experienced in option trading to implement the same tactics. For at least 90% of market participants, trading options is one of the most efficient ways of losing money.
mods: please delete if not appropriate, but i think the information is good for forum readers, as well as giving credit to the author, who runs a paid newsletter that i subscribe to. i have nothing to do with the author or newsletter.
-- Weekly Market Update for the Week Commencing 21st February 2011
Silver Scenarios
In the 14th February Weekly Update we said that silver was poised to make a big move over the weeks ahead. We went on to say that we expected silver to drop back to the low-$20s during the first half of this year, but as a result of the preceding week's new multi-year high in the silver/gold ratio we wouldn't be surprised if it moved at least a few dollars above its January peak before commencing a substantial correction.
Silver was strong last week and broke out to a new multi-decade high. This doesn't change our expectation that it will trade in the low-$20s during the first half of this year, but it does enhance the prospects for a big move over the weeks ahead.
We suspect that silver will soon commence a $10 downward correction OR that it will gain $8-$10 over the next several weeks before embarking on a $15-$20 downward correction. It's an interesting situation, and -- for information purposes only -- this is how we are dealing with it in our own accounts:
We are well covered against the latter scenario because an $8-$10 surge in the silver price would certainly be accompanied by a lot of strength in gold and in gold/silver equities (especially the junior gold/silver equities). Under this scenario we would be gradually selling all the way up, most likely increasing the cash percentage in our accounts from the current average of 35% to at least 50%. However, apart from already having a sizeable cash percentage we weren't, prior to last Friday, covered to the extent that we'd like against the former scenario. We obtained the desired coverage on Friday via the purchase of July SLV put options.
Our plan is actually a little more complicated than outlined above due to the fact that even if silver is about to embark on a multi-week surge to around $40, it could first pull back to the high-$20s (a 4-8 day pullback would be normal following the quick rise of the past three weeks). Having just bought some put-option insurance, we plan to boost our exposure to the long side by purchasing some SLV call options if (and only if) silver drops back to around $29 within the coming fortnight.
The above is as specific as we are going to get with regard to our own short-term trading tactics. This is mainly because we don't want to encourage anyone who is not already experienced in option trading to implement the same tactics. For at least 90% of market participants, trading options is one of the most efficient ways of losing money.
My cost average is about $19.66 per ounce. 
