Best trade if you believe Silver going to 50?

[SymTrader]

What’s the best options trade if you believe silver is going to $50 and gold to 2000+ before the end of this year? Assuming you are willing to risk say 20K and want the most bang for your buck, what ‘s the best strategy?
From a guy who has only ever held outright put or call positions.

 

[nazzdack]

Quote from SymTrader:
----best options trade....
----silver is going to $50 before the end of this year?
----the most bang for your buck....
----what ‘s the best strategy?
----a guy who has only ever held outright option positions.

1) ?......the December $49/$50 bull-call spread? You'd be paying ~3-cents per spread to earn ~100-cents per spread at expiration with the market at or above $50/ounce...... ~3200% return on margin :eek:
2) Some of the other "rocket scientists" here may know of other exotic types of combinations that can produce a higher annualized rate of return.

 

[da-net]

James Cordier @ Liberty Trading Group has some good ideas perhaps it would worth your time to listen to his current weekly outlook audio and consider his approach to trading options.

http://www.libertytradinggroup.com/

 

[Zr1Trader]

My mom asked me where she could buy silver as an investment yesterday. The top is in!!!!! Jk good luck man . How would a bull spread work, excuses my options ignorance. Long november 11 short december 11? I have physiucal silver from 13 bucks. Wish I would've used a little leverage!

 

[rosy2]

backspread

 

[peilthetraveler]

Quote from ForexForex:

http://finance.yahoo.com/q?s=SLV120121C00045000 It would take your $20,000 to $200,000+

Another 10x trade. http://finance.yahoo.com/q?s=GLD111217C00190000

Actually instead of buying the 45s he should buy the 38s because the ask price is 99 cents. he would make $10,000 more if he bought the 38s if the price goes to $50. Plus if the price doesnt go to 50 and only goes to 40, he still doubles his money. If he buys the 45s he loses everything if it only goes to 40. So the 38s are a better bet and he makes more money from $39 per ounce to $50 per ounce. But of course, if the price goes over $51 per ounce, then he would be losing out by owning the 38s to the tune of $20k for every dollar above $51. But still...the safe bet is the 38s because you never know how they will try to manipulate silver.

 

[ckumar88]

Thanks for the ideas.
I'm obviously a novice in options, so please bear with me. I am attracted to the straight-forward long call SLV trades, but my question is, wouldn't deep in the money options like the 38 or even the 45 calls get very thinly traded should the price get up to around 50? Would there be enough volume to square my position?

 

[rew]

Quote from ckumar88:

Thanks for the ideas.
I'm obviously a novice in options, so please bear with me. I am attracted to the straight-forward long call SLV trades, but my question is, wouldn't deep in the money options like the 38 or even the 45 calls get very thinly traded should the price get up to around 50? Would there be enough volume to square my position?

Hah, the last thing we option traders worry about is that we buy some cheap OTM option and then it goes deep ITM! If no one is willing to buy your options at at least their intrinsic value you can always get the intrinsic value by exercising them. (Exercise your calls on SLV, then immediately sell SLV at the market.) You lose the time value when you do that but deep ITM options don't have much time value anyway.

If I were you I'd be a lot more concerned about checking my assumption that silver is going to go to $50 in the first place.

 

[ckumar88]

Quote from rew:
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If I were you I'd be a lot more concerned about checking my assumption that silver is going to go to $50 in the first place.

Getting my assumptions wrong and losing money is something I'm quite familiar with, but actually exercising an option--this is something I need to check into. Thanks anyway.

 

[uptik2000]

Quote from Zr1Trader:

My mom asked me where she could buy silver as an investment yesterday. The top is in!!!!!

Funny you say that. Two weeks ago I was playing in a local poker tournament; three people at my table were talking all night about their silver and gold bull plays.
That's not to say the top is in however. The same conversations were going on in 1999 regarding tech stocks and it took a good while for the top to set in.