Trade Alert – (SLV) September 21, 2012

As a potentially profitable opportunity presents itself, John will send you an alert with specific trade information as to what should be bought, when to buy it, and at what price.

Trade Alert - (SLV)

Buy the (SLV) December, 2012 $28-$31 Call Spread at $2.40 or best

Opening Trade


expiration date: 12-21-2012

Portfolio weighting: 10%

($10,000/100/$2.40) = 40 Contracts

Silver still has more to run. After QE3, we decisively broke through $32.50, and have already made it as high as $34. So I am going to use this 70 cent dip to get in and acquire some white metal. If silver can maintain its current trend, it should reach $40 by early next year. All of the arguments about extreme monetary easing apply to silver as well as gold, so it is expeditious for us to diversify our exposure to the precious metals space.

The benefit of the (SLV) December, 2012 $28-$31 Call Spread is that it allows for a 7.74% decline in the price of silver and still reach your maximum profit point by the December 21 expiration. Silver is notoriously volatile, with about 2.5 times the volatility of gold, so it is prudent to have an extra safety cushion here.

Keep in mind that these are ball park prices at best. The best execution can be had by placing your bid in the middle market and waiting for the market to come to you. The difference between the bid and the offer on these out-of-the-money spread trades can be enormous. Don’t buy the legs individually or you will end up losing much of your profit up front. If you don’t get filled, then just wait for the next Trade Alert. The will be many fish in the sea.

These are the trades you should execute to get in:

Buy 40 December, 2012 (SLV) $28 calls at………$5.90
Sell short 40 December, 2012 (SLV) $31 calls.…..$3.50

Net Cost:………………………….…………..…...$2.40

Potential Profit: $3.00 - $2.40 = $0.60

(40 X 100 X $0.60) = $2,400, or 2.40% profit for the notional $100,000 portfolio.