KitcoKitco
 

Silver Trade

 

By Sean Blair

Sep 16 2009 9:59AM
www.investingvue.com

   

Silver and Gold prices are once again running amok. We feel that silver and gold will once again return to all time highs if not exceeding those highs. Interest rates being set at unthinkable lows will have inflation screaming in no time. 

There will obviously be corrections as we make our way to higher prices. We feel that there will be minor corrections coming in silver and gold. Please note the trade below. 

We follow Elliott wave for our trading methodology. There is a nice impulse wave that has formed in the silver market on a 60 min chart. If you note the trade below we’ve completed five waves of the impulse wave with a good short term selling opportunity. We feel that we are entering into the A wave of the correction cycle.

We will purchase a call option at the money to protect ourselves and give ourselves a little bit more of a stop. We don’t want to sell right at the money but let the market come to us.  This way we straddle the market…the call option is Delta neutral so if we get filled it will only cut into our profit by 50%.  If we start to really make profits we will exit the option and let the profit run on the short futures position.

Vice Versa if we don’t get filled on the short futures position and the market continues to rally then we make money on the call option.  If we get filled on the futures position and then the market rallies the option will alleviate 50% of the loss. This will allow us to widen our stop.

We like selling Silver at $16.50 in December and placing a stop at $16.60. We also like purchasing a call option in December for a price of 1.145.

It’s best to use this trading methodology on a daily price chart but still can be used on any increment.  I hope this helps!  Happy Trading!

Sean Blair

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Sean has been a commodity broker for the last fifteen years.  He has been a top trader for all commodity markets including precious metals. As a full service broker he will supply you with detailed analysis and specific trades for all commodity markets.

He also currently writes for http://www.investingvue.com