Options for stock investors. A better way to trade.

New Trade Alert March 9th – SLV Silver ETF

TIME TO SHINE like 2016 100% Silver Winner

New Trade Alert for (SLV)

iShares Silver Exchange Traded Fund Jan $14.00 Call @$3.00 or less

 


Risk Rating: 2     (1 = lowest   5 = highest)

Above Break Even Probability: 48%

Max Loss Probability: 16%


 

Asset appreciation has paused with the current  unwinding in Stocks, Crude, and Metals.  All were at the high end of recent ranges just two weeks ago before this profit taking downturn.

 

Gold marked multi month highs at $1250 and now pulling back to $1200 psychological support.  

 

Precious metals price shock potential is on the upside as safety buys in an uncertain world.

 

 

SLV Silver ETF has stayed between $13 and $20 for over two years.  The $16 support sits right below to lean on as a buy in base.

 

 

A push above $17.50 end of February highs sends SLV to the near $20 August  top.  A bigger breakout of this $13 to $20 channel  targets a measured move to $27 a far cry from the $48 2011 price extreme.     

 

The Options Way: Unlimited Upside Potential with Limited Risk.

A SLV long call option can provide the staying power for a market upturn.  More importantly, the maximum risk is the premium paid.

 

One major advantage of using long options instead of buying or selling shares is putting up much less money to control 100 shares — that’s the power of leverage.

 

Choosing an option can sometimes be a daunting task with all of the choices and expiration months and strikes.  Simply put, traders want to buy a high probability option that has enough time to be right.

The option strike price is the level at which you have the right to buy without any obligation to do so.  In reality, you rarely convert the option into shares. Simply sell the option you bought to exit the trade for gain or loss.  

There are two rules options traders need to follow to be successful.

Rule One:  Choose an option with 70%-plus probability.  The Delta is a measurement of how well the option reacts to movement in the underlying security.  

 

It is important to buy options that payoff from only a modest price move.  There is no need to ONLY make money on the all but infrequent large price explosion.

Any trade has a fifty/fifty chance of success.  Buying options ITM options increase that probability. 

 

That Delta also approximates the odds that the option will be In The Money at expiration.

 

Buying better options are more expensive, but they are worth it — the chances of success are mathematically superior to buying cheap, long shot Out Of The Money lottery tickets that rarely ever pay off.  
 
With SLV trading at $16.30, for example, an In The Money $14.00 strike option currently has $2.30 in real or intrinsic value.  The remainder of any premium is the time value of the option.

Rule Two: Buy more time until expiration than you may need.  Time is an investor’s greatest asset when you have completely limited the exposure risks. 

Traders often buy too little time for the trade to develop.  Nothing is more frustrating than being right but only after the option has expired premature to the market move.

 

 

Trade Setup: I recommend the SLV Jan $14.00 Call at $3.00 or less.

 

This option strike gives you the right to buy the shares at $14.00 below the 52 week low was at $14.08.  Therefore this option can has the right to buy below the April bottom at a major discount. 

 

 

   

The January option has over ten months for BULLISH development.   An 77 Delta on this strike means the option will behave much like the stock.
 
The maximum loss is limited to the $300 or less paid per option contract. The upside is unlimited.

 

The SLV option trade break-even is $17.00 at expiration ($14.00 strike plus $3.00 or less option premium). That is just 75 cents above the current SLV ETF price.

 

A SLV move to the $20 top of the two year sideways range would make this option worth $6.00 for a 100% gain.   

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