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Trading Volatility, Ballasted by Gold

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Went to plan B and bottled LSIL at 48 today, looked worringly like it could dive back to my buy in. So will watch and hope it goes there, if not around 15% is better than nothing. Just couldn't decide whether to double up or take profit at the weekend, so sitting out seemed the best option.

 

Not sure the calculation to your AGQ at 40, but would suit me fine!

 

Yep, looks like a decent down-leg here. Was lucky to sell at the top. As for 40, near half way there already. I'm not sure what the exact equivalent would of silver would be with AGQ at 40. Probably around 28. I'm hoping for a brief spike down to that. And then off to the races.

 

 

agqq-1.png

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LSIL now at 45ish, looking like it also wants to head towards the low 40's. I'd be happy to buy back in around 41-42 on LSIL Not sure but I don't think it's quite as low as Silver at 28, probably need around sub 30c though.

 

Powder dry :) (no smiley for salivating,licking lips :lol: )

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LSIL now at 45ish, looking like it also wants to head towards the low 40's. I'd be happy to buy back in around 41-42 on LSIL Not sure but I don't think it's quite as low as Silver at 28, probably need around sub 30c though.

 

Powder dry :) (no smiley for salivating,licking lips :lol: )

 

Yep, I'm also feeling confident that AGQ will dip to 40 from the present 50, but may take a good few weeks. Call me superstitious but I hesitate to post any premature smileys as don't want to jinx myself.

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Yep, I'm also feeling confident that AGQ will dip to 40 from the present 50, but may take a good few weeks. Call me superstitious but I hesitate to post any premature smileys as don't want to jinx myself.

 

Bobbing around now, before a final plunge OR are we base building for a push up? What do you reckon R.H

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Bobbing around now, before a final plunge OR are we base building for a push up? What do you reckon R.H

 

Too late, someone already gave me the answer :lol:

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Bobbing around now, before a final plunge OR are we base building for a push up? What do you reckon R.H

 

Yep, ir's still on track. Was a pleasant surprise the wake up and find AGQ had plunged from 52 to 46! My buy order is still in at 40, which could be only a few weeks away.

 

Would love to post the latest chart, but photobucket is playing up.

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pivot.png

 

 

Pivotal point here. Am looking for the trend down to continue.

 

However, if wrong and AGQ instead heads up towards near 60, will look at rebuying just below where it was sold. This reflects my medium/ long term bias to the upside.... over and above short term volatility.

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Down trend re-commenced?

 

Yeah, was wondering that on LSIL, saw your pivotal point post and looked like a turn down on Friday.

 

Was itching to buy the developing uptrend. Had previously kept resisting as it never touched my 40-41 target buy area, thought it might have escaped that low, now not so sure, P.M's seem weak to me.

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Yeah, was wondering that on LSIL, saw your pivotal point post and looked like a turn down on Friday.

 

Was itching to buy the developing uptrend. Had previously kept resisting as it never touched my 40-41 target buy area, thought it might have escaped that low, now not so sure, P.M's seem weak to me.

 

A major factor in reading a continued down-trend is passage of time. Averaging the down-trends of the previous two [as seen on the longer term chart] you'd expect this one to last for 2 or 3 months. Current down-trend is only a month or so old.

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Good analysis here:

 

http://news.goldseek.../1353511500.php

 

 

 

 

silvermonth.png

 

Gold’s companion Silver is currently trading in a tighter consolidation with $35 as resistance and $27 as support. Note that Silver has tested and held above $27 six times in the last fifteen months. Silver also held above the rising 40-month moving average which supported the market in 2009 and 2010. The RSI has also made a higher low and volume has trended down during the past seven months

 

The evidence argues that the bottoms remain well intact and the metals are consolidating before the next breakout which entails Gold breaking $1800 and Silver $35. However, these breakouts are by no means imminent. Since we are dealing with monthly charts that means potentially three or four more months of consolidation. Furthermore, sentiment data such as the COT structure and public opinion polls need some improvement before the market could sustain a breakout. Thus, more consolidation could be the order of the day for the metals.

 

.

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Good example of the disparity between $silver and AGQ. The time decay element shows AGQ a lot lower relative to $silver than you would otherwise expect.

 

Obviously advantageous for trading volatility.

 

 

silvertrack.png

 

 

agqtrack.png

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"AGQ / time decay element"? - This Strategy could make sense for you ?

======

Buy Calls on SLV

Sell out-of-money Calls on AGQ (for a smaller "Face Amount")

But:

Stay alert, in case the market runs up fast

 

Examples:

SLV- at $32.36 / AGQ- at $53.84 (Below Pct ATM)

===

Calls/ strike/-%ATM : -Jan- /%ATM : -Mar-/%ATM :

SLV-$33.00/102.0% : $0.82/2.53% : $1.34/4.14% :

SLV-$32.00/98.89% : $1.28/3.96% : $1.83/5.66% :

SLV-$31.00/95.80% : $1.94/6.00% : $2.41/7.45% :

SLV-$30.00/92.70% : $2.69/8.31% : $3.10/9.58% :

===

AGQ$65.00/120.7% : $0.72/1.34% : $1.95/3.62% :

AGQ$60.00/111.4% : $1.70/3.16% : $3.02/5.61% :

AGQ$55.00/102.2% : $3.00/5.57% : $4.75/8.82% :

AGQ$50.00/92.87% : $5.70/10.6% : $7.10/13.2% :

===

Some Option Spread examples:

(Both 102% atm):

Buy : SLV-$33.00/102.0% : $0.82/2.53% : $1.34/4.14% :

Sell : AGQ$55.00/102.2% : $3.00/5.57% : $4.75/8.82% :

=== : Ratio : 167% / ==== : 3.66 / 220% : 3.54 / 213% :

For same money...

Buy : Janx50ct/ Marx50ct : $0.82/$4100 : $1.34/$6700 :

Sell : Janx14ct/ Marx14ct : $3.00/$4200 : $4.75/$6650 :

Net : ================ : ====/+$200 : ====/- $050 :

I prefer sell about 70% money...

Buy : Janx50ct/ Marx50ct : $0.82/$4100 : $1.34/$6700 :

Sell : Janx10ct/ Marx10ct : $3.00/$3000 : $4.75/$4750 :

Net : ================ : ====/-$900 : ====/-$1950 :

 

I like the Jan. position best:

Buy : Jan$33c x50cts : x $0.82/ for $4100

Sell : Jan$55c x10cts : x $3.00/ for $3000 / net cost: $900

 

The lower percentage, means you are less likely to lose money if prices shoot up.

I plan to monitor this spread, and see how it performs.

Face Amounts :

Buy : SLV$33c x 50cts : x $3,300x1 = $165,000

Sell : AGQ$55c x10cts : x $5,500x2 = $110,000

==================== Net Long = $ 55,000 /for $900: 1.63%

 

(Both 93% atm)

Buy : SLV-$30.00/92.70% : $2.69/8.31% : $3.10/9.58% :

Sell : AGQ$50.00/92.87% : $5.70/10.6% : $7.10/13.2% :

=== Ratio : 167% / ==== : 2.12 / 128% : 2.29 / 138% :

I would not do this spread,

if Silver shoots up, it could easily lose money.

But it would do okay if Silver trades sideways.

=======================

 

You can also move the Strike, rather than just the Size of underlying Face of Contracts:

 

Split Strike Option Spread examples:

(SLV 99%, AGQ 111.4% ATM)

Buy : SLV-$32.00/98.89% : $1.28/3.96% : $1.83/5.66% :

Sell : AGQ$60.00/111.4% : $1.70/3.16% : $3.02/5.61% :

=== : Ratio : 188% / 113% : 1.33 /79.8% : 1.65 /99.1% :

I prefer sell about 70% money...

Buy : Janx50ct/ Marx50ct : $1.28/$6400 : $1.83/$9150 :

Sell : Janx26ct/ Marx21ct : $1.70/$4420 : $3.02/$6342 :

Net : ================ : ===/-$1980 : ====/-$2808 :

 

 

In this case, I like the Mar. position best:

Buy : Jan$32c x50cts : x $1.83/ for $9150

Sell : Jan$60c x21cts : x $3.02/ for $6342 / net cost: $2808

 

Face Amounts================================== : delta : Adj. Face

Buy : SLV$32c x 50cts : x spot $3,236x1 = $161,800 x 60% : $ 97,080

Sell : AGQ$60c x21cts : x spot $5,384x2 = $226,128 x 35%E: $ 79,144

==================== Net Long = $-64,328 ===== $ 17,936

==================== for $2808: 15.7%

 

It is important to make the Delta adjustments, to see the Net Expsoure,

but I did not have to do so in the first case, because they were both 103% ATM, with similar deltas.

In both Option Spreads, there will be a benefit for AGQ decaying relative to SLV.

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Hey, Romans;

 

Are you ready yet to move this Blog to the Main section ?

 

Please let me know (by PM, or here) when you are

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"AGQ / time decay element"? - This Strategy could make sense for you ?

 

 

To be frank, I have something of a 'mind-block' towards strikes, puts, calls etc. Perhaps this is because over and above markets, I am also occupied with other pursuits at the moment. Call me a lazy trader, but the strategy I've settled on involves minimal mental/ time expenditure. Different strokes for different folks etc.

 

AGQ suits me because I can simply buy and sell an instrument which is extremely volatile, and it's this volatility I want to trade. That there is a time decay element, where AGQ could deteriorate further than simply silver over a three month period or so, also suits me because when I sell AGQ I want to buy lower... then sell again on a spike. So taking my latest trade for an example; AGQ was sold at 60 when silver was 35.... AGQ is now well down at 53 with silver only having come down to 33.5. So instead of AGQ pulling back 3 points [twice that of silver's 1.5] it has pulled back over twice that. Excellent for my purposes where I currently have a buy order in at 40.

 

With this trade, I am not looking to accumulate units of AGQ but USD. If i miss the trade this time, easy enough to find another point to trade the volatility. Keep in mind, this trade is a hedge, in the sense of currency diversity, from long gold/ silver.

 

The bigger picture, over and above this trade, is long positions in both gold and AGQ [to sell on the big spike I think is coming in a year or two]. That AGQ is a relatively easy buy and sell for me, almost care-free, reflects my macro views where silver and USD are both strong forms of liquidity.... for now.

 

Of course, the proof is in the pudding. I have had one successful trade so far which has near covered the cost of my long AGQ position. Because I trade infrequently, these positions and trades are relatively large involving near all the liquid capital I have at my disposal..

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Hey, Romans;

 

Are you ready yet to move this Blog to the Main section ?

 

Please let me know (by PM, or here) when you are

 

Yep, no prob. Now that I am posting regularly, the thread shouldn't be too hard to find on the main board.

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Welcome back to the Main board, RH

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Good example of the disparity between $silver and AGQ. The time decay element shows AGQ a lot lower relative to $silver than you would otherwise expect.

 

 

If you shorted ZSL (Double short silver) that would give you a synthetic double long silver but with the time decay aspect working in your favour.

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If you shorted ZSL (Double short silver) that would give you a synthetic double long silver but with the time decay aspect working in your favour.

 

Perhaps something to consider in regard to long silver. But this thread is concerned with trading silver [for USD] in the relative short term term, and is therefore more suited to AGQ. On this thread, the time decay element works to the trade's advantage. For example:

 

$silver has only dropped from 35 to near 33. AGQ has dropped from 60 [where sold] to near 52!

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To be frank, I have something of a 'mind-block' towards strikes, puts, calls etc. Perhaps this is because over and above markets, I am also occupied with other pursuits at the moment. Call me a lazy trader, but the strategy I've settled on involves minimal mental/ time expenditure. Different strokes for different folks etc.

 

AGQ suits me because I can simply buy and sell an instrument which is extremely volatile, and it's this volatility I want to trade. That there is a time decay element, where AGQ could deteriorate further than simply silver over a three month period or so, also suits me because when I sell AGQ I want to buy lower... then sell again on a spike. So taking my latest trade for an example; AGQ was sold at 60 when silver was 35.... AGQ is now well down at 53 with silver only having come down to 33.5. So instead of AGQ pulling back 3 points [twice that of silver's 1.5] it has pulled back over twice that. Excellent for my purposes where I currently have a buy order in at 40.

 

With this trade, I am not looking to accumulate units of AGQ but USD. If i miss the trade this time, easy enough to find another point to trade the volatility. Keep in mind, this trade is a hedge, in the sense of currency diversity, from long gold/ silver.

 

 

I'll try and be diplomatic here but I think your thinking could be wrong here Roman. I understand the premise of what you intend to do, buy low and sell on a spike in order to take advantage of the leverage available with AGQ, but you seem to be suggesting that the time decay element with AGQ is an advantage when it is actually a disadvantage. Let's say that instead of trading AGQ you were trading ZSL.

 

So in other words any time you decide you want to go long $XXXX of AGQ, you instead went short the equivalent exposure of ZSL, this will give you the same exposure to the price of silver that you desire but with the added benefit that you profit from the time decay aspect during your duration of exposure, rather than lose out because of it.

 

Here's chart I made up, it shows the relative performance of short ZSL in black along with the performance of long AGQ in blue;

 

ZSLAGQ.png

 

At the end of just one year there is a very big difference in performance.

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