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“Silver Shots” Poised to Skyrocket 12,785%
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“Silver Hits Critical Levels – U.S. Mint Halts Production of Silver Coins
“New Gov’t-Regulated $1 “Silver Shots” Poised to Skyrocket 12,785%
“Forget about silver coins, ETFs and silver mining stocks. New $1 “silver shots” give you a very real opportunity to turn $10,000 into $1.3 million by year’s end.
“But you must act by June 15, 2009, to ensure maximum gains. Here’s why… “
OK, so first of all we need to start by dispelling one oft-cited myth — the U.S. Mint has not stopped production of silver coins. They are seeing huge demand for the silver American Eagle bullion coin, so they have stopped producing the collectible versions (the “uncirculated” and “proof” versions that the Mint sells from its own website) in order to make sure they can mint enough of the bullion coins to meet demand. That’s because the mint has a mandate from Congress to produce enough bullion coins (both silver and gold) to meet demand every year, but the collectible coins are “optional.” Both silver and gold Eagles in those collector versions (with the “W” stamp from West Point) are on hold now due to high bullion coin demand, as are fractional gold coins (1/2 ounce, 1/4 ounce, etc.). The bullion coins aren’t sold directly by the mint, but they’re easy to buy through dealers or banks.
While we’re talking about halting coin production, by the way, I’d vote for getting rid of the worthless penny first, then stop printing dollar bills so we could force usage of the more efficient dollar coins. Can you believe that the Mint still produces more than five billion pennies a year? That’s a lot of zinc that I’m sure we could find a better use for, and a lot of wasted effort.
But this isn’t about my anti-penny ranting (and what would all the eager collectors lined up for rolls of new Lincoln pennies do with their time?) — this is about investing in silver. And more specifically, it’s about pitching a subscription to Death Cross Trader by Zachary Scheidt. He’d like you to subscribe to his newsletter for $250 (a steep discount, naturally), and in return, he’ll tell you all about what “Silver Shots” are … or, of course, you could just read on and watch the Gumshoe in action as he tries to figure it out for himself.
That second option is free, by the way.
I don’t know much about Death Cross Trader, but the death cross in chart parlance is when the long-term moving average line crosses above the the short-term moving average — which apparently is generally a bad sign. It’s more complicated than that, with other options for interpretation, but that’s the basic shtick. I don’t think this newsletter is particularly focused on “against the market” picks on the short side, though Scheidt is profiled as an options trading expert which would mean he’s likely to use both puts and calls. Or perhaps it’s just a cool name.
So what else do we get in the ad? There’s plenty more about silver — about the CPM Group’s assessment that 97% of the silver ever mined has been consumed (by industrial uses — photography, mirrors, etc.), and plenty more about the huge investor demand.
“And The Wall Street Journal states that in March, sales of Silver Eagles surged more than 9-fold from the previous month… and that investors are clamoring for millions more.
“There simply isn’t enough silver on the planet to meet demand, and “silver hysteria” is sweeping the globe.
“In fact, silver coins with a $1 face value are selling for $31 and higher on eBay.
“And silver collectors are running full-page ads in major newspapers like The Washington Post… offering top dollar to folks willing to part with their family silver. ”
So this dance will probably continue — Silver has moved up and down dramatically in recent years, and as it moves up folks tend to sell their coins and scrap silver, which drives the prices back down a bit. Right now the shiny metal is certainly on a tear, along with gold, and it offers a cheap entry point into investing in precious metals since it’s sort of like the “poor man’s gold” in that a one-ounce coin is very cheap.
And the $31 price is real, though the $1 face value of an American Eagle silver coin is pretty much meaningless, they’re minted for investors and are not circulating currency. Premiums for silver coins, as a percentage, are currently huge compared to gold, though the $31 price is the outlier, for uninformed investors buying on ebay or the Home Shopping Network.
I don’t know if a lot of folks are getting $31 for bullion silver coins right now, but certainly some fools are paying that price. Dealers have plenty of 2009 Silver Eagles available and are selling them for about $2 over spot per coin — doesn’t sound so bad, but that’s still about a 15% premium over the $14 melt value of an ounce of silver (the “spot price” is the value of the actual commodity, an ounce of silver traded in London or New York on the commodities exchanges, and what it’s generally considered that the coin would be worth if melted down).
Gold American Eagles, though obviously far more expensive, often are sold by big dealers for a more reasonable premium these days of just three or four percent. So though you can’t buy the uncirculated or proof coins direct from the mint right now, you can still buy plenty of 2009 or earlier silver Eagles through a dealer — and the supply seems to be met, or close to it, otherwise I imagine the prices would be sailing even higher.
But we’re more excited about the crazy returns teased in this letter, right? So what is this special new way of investing in silver that they call “Silver Shots?”
“If silver crawls back to $150 per ounce-its historical average-then $1 “silver shots” will move to $130 per shot… turning $10,000 into $1.3 million.”
So that’s not bad, right? This is clearly a heavily leveraged play on silver of some kind — after all, even buying silver at $14 and selling it at $150 would provide a huge return, but only a bit over $100,000 from a $10,000 investment, far less than $1.3 million. That extra 10X return (plus!) comes from the leverage of “silver shots.”
And another scenario is provided, which would have Silver at stupendous 20-year highs but is here called the “worst case” scenario …
“… for the sake of being conservative, let’s just say that because of these two events [Obama cutting the deficit and industrial alternatives being discovered], silver only makes it up to $28 per ounce.
“In other words, it doubles from its current level.
“If that happens, $1 “silver shots” will still move to $10…giving you a 10-fold gain.”
OK, so we’re talking about something that goes up with Silver almost dollar for dollar, with significant leverage, and that you can buy for about $1 a share but would be worth $130 if Silver hits $150, and $10 if Silver hits $28.
So what can that be?
Well, it’s possible that it’s something a bit more obscure than I’m imagining, but I’d say that the easiest way to get these numbers is by …
Buying call options on the iShares Silver Trust exchange traded fund (SLV).
The iShares Silver Trust, for those who don’t know, is an ETF that buys physical silver and holds it in a vault (along with, I think, some more complex financial transactions to try to closely match silver’s moves on a daily basis — not sure of the specifics), and trades actively on the market at a price that usually very closely reflects the price of an ounce of silver per share of the ETF — so on Friday SLV closed at $14.50 at a time when silver traded on the Comex was going for about $14.70. They use the London Fix price to set the Net Asset Value of this pool of silver, minus expenses, so it’s usually slightly lower than the current silver price, but moves more or less perfectly along with silver.
And you can trade options on SLV just as you can with many stocks and ETFs — so if you wanted to buy exposure to a hundred ounces of silver, you could do so by buying one call option contract on SLV. Since the ad often teases an “end of the year” timeframe, let’s look at the long-dated call options.
SLV has an option string available for January 2010, so if we look at that we can see that if you’re looking to pay something in the neighborhood of one dollar, the closest bet would be the $17 strike price, which closed on Friday at $1.15.
That means you could put down $115, plus commission, and you would get essentially all the profit from Silver moving above $17 an ounce between now and January. Of course, in exchange for that, your bet is worthless if silver remains under $17 for the next eight months (that is, if silver goes down, or goes up by less than 20% or so). Of course, you could trade in and out if silver fell or spiked over the remainder of this year, but for the purposes of a potential huge gain if silver climbs dramatically, we have to assume that you hold the options — so here are a couple scenarios that assume you buy this call option today:
- Silver goes to $19 an ounce in January, about a 30% move from the current price. Since you have the right to buy shares of SLV at $17, we assume that SLV continues to track the physical silver price and those SLV shares are now also at $19. That means your option contract (on 100 shares, as is standard) is worth $200, so you get a nice gain of $85 (minus commissions) on a $115 investment, a gain of about 70%.
- Silver stays pretty close to where its average price has been over the last three years, $12-14 or so. Your options expire worthless, and you’re out $115.
- Silver goes to $28 an ounce by mid-January, doubling as the teaser implies is the “worst case” scenario — your $115 investment should now be worth about $1,100 (holding the option gives you the right to buy 100 shares at $17 and sell it at $28, for an $11 profit per share). That’s a gain of over 950% — not bad work for eight months, and the return from holding the actual SLV or physical silver would have been more like 100%.
- Silver goes to $150 an ounce, which the ad argues is “likely” given the shortage and the rising investor demand. Then your $17 call option is worth $133, and you’ve still got a call on 100 shares, so that’s $13,300 from your initial $115 investment, for a return of … 11,000%? feel free to check my math on that one.
So that’s my best estimate as to what the “silver shots” are — partly because the numbers match up very nicely from the tease and the newsletter is options-focused, and partly because if you’re going to help retail investors get this kind of leverage it’s probably not going to be something more obscure like futures options — and, depending on the contract, some of the SLV options actually trade in decent volume, so a newsletter could get away with recommending them without wildly moving the price. And yes, options trading is regulated by the US government, just like stock trading, so that part of the tease can be justified.
And no, it’s definitely not some secret kind of actual silver metal that inconceivably trades at a huge discount and provides huge leverage — that doesn’t happen. (You can buy silver “shot” — little vials or bags of industrial silver pellets, they look just like little ball bearings, and every time I see it I picture myself loading it into shotgun shells to ward off the werewolf … but it’ll cost you at least the melt value of the silver these days).
Here’s the final summary of reasons for doing this, per the teaser:
“Fact #1: Vanishing supply: The global silver supply has practically vanished. In fact, 97.5% of all the silver ever mined has been consumed by industry. It is gone forever and irreplaceable at any price. The supply is so tight that the U.S. Mint had to halt production of American Eagle silver coins.
“Fact #2: Soaring Demand: The demand for silver is soaring. That’s because for many industrial uses, there is no substitute for silver. Silver is essential for electrical grids, hybrid cars, medical applications, photography and many more. We have to have it!
“Fact #3: The Price Is Right. Silver is near its historical low… around $14 per ounce. Its historical high is $1,400 per ounce. Even if supply/demand forces drive silver only a small fraction of the way back to its historical high, people holding “silver shots” will make a fortune.
“Fact #4: Unprecedented Upside Potential! “Silver shots” allow you to control a full ounce of silver for just $1. And while “silver shots” move in line with silver prices… they move exponentially higher. That means even a small move in silver prices will send silver soaring.
“Fact #5: Trigger Point Has Been Hit! Powerful economic, market and geopolitical forces have converged to create a “once-in-human-history opportunity.” People who buy “silver shots” today for $1… can realistically hope to sell them for $130 or more in December 2009. ”
I’m sure there are many folks here who know the silver market much better than I do, and I know many of you feel passionately about it, so I’ll let you argue about the supply-demand equilibrium that you expect for the rest of this year — let me just comment briefly on these things to provide a possible counterbalance to the argument …
#1 — supply of silver from mines might actually increase as base metal mining increases (silver is often a byproduct of other mines), and as some big silver-focused mines come on line in the near future — the spike in silver over the last few years made silver exploration viable on its own for some companies, so there are likely to be more silver mines in the years ahead.
#2 — silver demand from industry does seem to be increasing, but a lot of that industrial use depends on economic growth. Silverware demand is down and photography demand is way down, and both of those were major markets for silver ten years ago … the spike in demand over the last year or two is explained, by a lot of people, as largely investor demand, from the Silver ETF and coins … that kind of demand can be a lot more fickle than industrial demand, so gravity might come into play at some point.
#3 — I have no idea whether silver will return to its “historical high” of $1,400 in 2009 dollars, but do note that this high was in 1477, according to the chart in the teaser, before Columbus sailed to the new world (and before the conquistadors found all that new gold and silver). Silver has been on a steady trend down ever since, notwithstanding the one really dramatic historical spike in modern times, when the Hunt brothers tried to corner the market and temporarily got prices up to something like $50 an ounce in 1980 (probably near $100 an ounce in current dollars). And the price can go well below it’s recent average, too, it’s been down below $5 in recent memory. I’ll go out on a limb and say that if it does go to $1,400, it sure ain’t going to be in time for your options expiration in January.
#4 — that actually sounds just about right — you get nice big leverage from the options … he doesn’t remind you that the leverage comes at a price, that you have to be right about the timeframe and the price levels, and be willing to give up your entire investment if you’re wrong, but we all probably know that about options trading anyway.
#5 — that’s your call. If silver does go to $150 by January (or, God forbid, $1,400), then this certainly was a “once in a lifetime” opportunity to profit from that. But that’s a BIG if — according to the chart they use in the ad, silver has not been that high ($150) since the American Revolution. Certainly not impossible, but even though I own silver I don’t think it’s going anywhere near that high in the next couple years. A decade, maybe.
So … I personally own some silver, too, and I actually think it’s more physically attractive than gold (for whatever that’s worth), but the bulk of human history disagrees — gold is the one that has historically spent more time being considered “money,” so even though it has much less value in the real world than silver, it remains a fallback position when other mediums of exchange fall apart … thus, people in countries with unstable currencies buy gold jewelry for brides (India), and people who fear the demise of fiat currencies in general buy gold, and those who think inflation will be out of control thanks to the printing of new money, buy gold. In recent years, silver has come in as the poor man’s silver to cope with these same situations, but I’d be more confident in gold if things got really cataclysmic.
Like anything else, a precious metal is only worth what someone is willing to pay you for it, so there is always the fear that investor demand — which truly drives the price now, jewelry is taking a backseat during this latest gold rally, and industrial demand is probably suffering from the continuing death of traditional photography and the weak global economy — could dry up if cash is needed elsewhere, or if deflation really sets in. The brief fear of deflation recently gave the dollar its rally, and that seems to be over now, but I don’t know if it will come back.
Deflation is scarier than mild inflation, and perhaps even scarier than brief periods of severe inflation, but I’d personally have to agree that inflation worries me more as a saver right now — if only because I know the federal government is a lot more afraid of deflation and will print as much money as is needed to stave it off. Yes, I said “saver” — I think that’s a reasonable way to think of gold and silver bullion, as a way to preserve your savings … I perfer to think of “investments” as assets that can generate income and help you compound that income into long term growth, like stocks, or bonds, or land … or a gold or silver miner.
At some point, there will be so much money around that companies and people will have to start spending it, even if they’re still nervous about the future — it’s the American way. Will that drive hyperinflation in the very near term, and send asset prices shooting through the roof? That’s about the only scenario I can bring up that gets silver to $150 in eight months, and it’s certainly more feasible than it would have been a few years ago, but it still seems … well, I’ll be kind and say “a bit ambitious.”
So whaddya think? Any of you options traders have ideas for leveraging silver that are more exciting than my vanilla description? Preferred ways to play silver in the years ahead? Does silver shot really work on werewolves? Let us know.
And if you’ve ever subscribed to Death Cross Trader, click here to let us know what you thought — we’ve had two brief reviews submitted so far, with an overall assessment that I would classify as “tepid,” so we could use some more input. Thanks!
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Subjects: Death Cross Trader, ishares Silver Trust, silver, SLV, Zachary Scheidt
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AGQ symbol is a silver trade that may be better than options or slv is agq (silver etf that multiples the gain compared to slv should silver go higher)
[Reply]
True — this is one of the ProShares Ultra ETFs. It won’t get you the 10X or 1,000X returns teased as possible through options, but, to their credit, it has actually been reliably doubling returns of the SLV as designed over the past six months (many Ultra ETFs, short and long, have trouble holding the benchmark if you invest in them for more than a few days, they’re designed for daily matching, not long term matching of performance, and often give very surprising results for long term holders).
Just FYI, unlike SLV the AGQ Ultra ETF is not primarily a simple commodity pool trust, SLV holds actual silver, AGQ uses futures and other financial instruments to match silver’s moves and double them.
[Reply]
Often, the “surprise” isn’t pleasant. What hasn’t been clearly stated is that if the price of silver goes down, the losses are magnified as well due to the 2X leverage being applied on a daily basis.
There’s a fairly scary rule in investing and it goes like this: if you lose 50% of your investment you now need to make back 100% just to break even. You’ve heard of that, eh? Not an easy feat.
You can do the math to figure out on a percentage basis the difference in losses between holding SLV or AGQ in the two months from late February to mid-April. The point is, be sure you understand whether the critter has teeth before you stick your hand in the cage.
Most amateur investors make the classic mistake of first asking how much they can make on an investment. The first thing you should want to know before making an investment is the risk of loss. That is, not what you can gain, but what you can lose. Beyond that, with almost any commodity (including silver) it’s not so much what you buy……..as WHEN you buy it.
[Reply]
Doug Reply:
May 25th, 2009 at 7:08 am
SLV has 2 option symbols for same strike, why, and which symbol to take? at 17 strike?
[Reply]
StockGumshoe Reply:
May 25th, 2009 at 3:46 pm
Usually it’s safest to look for the one that has more volume or open interest and use that — they’re usually the same option, sometimes for January you’ll see the LEAP ticker (LEAPs are long term options that expire in January), which around this time of year gets adjusted to become a regular options ticker. The contract term doesn’t change, just the ticker symbol.
Be careful, though, there are sometimes non-standard options as a result of a merger or large one-time dividend, etc. — don’t think you’ll find that for SLV, but you may see it for other stocks.
[Reply]
Travis did it again! If you LOVE silver, how about buying the SLV Jan ‘10 $13 and selling the Jan ‘10 $17’s on a combo ticket for a $1.50 debit? If you have a fee account, your Max Gain is $4 less ticket charges. If SLV stays the same, the $13’s should be worth $1.50. As ST says above, you must be able to withstand the $1.50 loss if SLV goes down. Hope your picnic was not rained out like ours ;-(
[Reply]
The ACQ suggestion was in the context of the Gumshow article about silver prospect to go higher in a short timeframe which extends to the months; perhaps less than 1 year ahead (not years) as I understood the article. In this case AGQ may be a good choice among the others such as slv and options.
[Reply]
spreadtrader Reply:
May 24th, 2009 at 12:44 pm
True enough.
[Reply]
Here’s a potentially better option play….PLATINUM….buy SWC calls.
To do the comparable trade to the Gumshoe’s hypothetical (SLV January 17 calls @ 1.15) you’d buy the SWC January 7.50 calls @ 1.25 (.10 cents more…..sink me).
BUT buying the option doesn’t end the analysis. Any prudent option speculator (and that’s what option trading is…speculation) does a risk reward analysis. Yes, Virginia, there is risk in holding long options……you could lose your entire investment.
So let’s look at the comparative risk. Well, with option implied volatility so low both of these options are so cheap that we’ll say for argument’s sake that we’ll risk it all. If you lose everything on this trade definitely SLV January 17 calls are better than SWC January 7.50 calls…..by 10 cents per contract. That’s pretty much a wash wouldn’t you say?
Now let’s look at the potential reward. SWC is clearly better and here’s why. The one year range for SLV is 12.28. Next, you take half that (6.14) and add it to the 12 month low (8.45). That makes 14.59….where’s the price today? Is it a coincidence? (Tell it to Fibonacci.) Silver has already retraced half its annual range.
So let’s do the same with SWC. The annual range is 20.96. Half that (10.48) added to the low (1.76) is 12.28. Fibonacci says that’s where this is headed…it’s essentially a double.
Where is silver really going? Is it $1,400 an ounce? I doubt it, but if so, platinum will be priceless. SLV would have to completely retrace its annual range by January in order to outperform the SWC January 7.50 call options if SWC closes at only half of its annual range (12.28) by January option expiration. Do the math.
The real question here is how much will silver outperform platinum in the next six months? My sources (DW&A relative strength comparative analysis) tell me that SWC is a sell but in a column of X’s compared to SLV on a relative strength basis. So the odds are fair that SWC will be at 12.28 faster than SLV will be at 22.72.
Disclosure: I own SWC, SLW and SSRI (not SLV).
[Reply]
chief151 Reply:
June 3rd, 2009 at 1:15 pm
John, interesting analysis. Are you a full time trader?
[Reply]
What is the best way to set up an account to buy SWC options? Is their something or someone out there who will manage an option account?
[Reply]
marco Reply:
May 25th, 2009 at 9:41 am
I have found the cheapest way to trade options (or stocks, for that matter) is with Interactive Brokers. They charge $1.00 or so per contract and $1.00 or so per 100 shares up to a small maximum, which I have never hit.
They don’t offer much assistance, so you need to do your trading, but their platform is pretty easy and I think you can set up a paper trading account, which is advisable if you have never traded options before. As noted in an earlier comment, options are speculative and it’s very easy to lose your entire investment.
Optionxpress is also very good for trading options, although it’s much more expensive than Interactive Brokers. I use both, but I trade with IB. I find that Optionsxpress has better information (charts, option chains, greeks etc.) which is why I keep an account at both brokers.
[Reply]
Travis, despite your encyclopedic knowledge of the stock market, you are not a businessman at heart – get rid of the penny! What would all the retailers of America do without their beloved .99 prices? (Make change with a 1¢ stamp?)
[Reply]
JRP Reply:
May 25th, 2009 at 10:32 am
I’d love to tell the retailers of America what to do WITH their beloved .99 prices. This staple of psycho-manipulation is so transparent and so ubiquitous that we take it for granted and laugh it off; nevertheless, it is a badge of dishonesty and an insult to the customer. If we could persuade a critical mass of merchants to advertise an item at, say, “$4″ instead of “only $3.99,” the laugh we direct at the penny-pinchers would become a sneer, I would be able to count my change more easily, and the cent would be sent packing. Any offers to start the disk rolling?
[Reply]
Sean Reply:
June 17th, 2009 at 11:42 am
What about the need to change every state and local income tax to 5 cent increments?
After all, we know that a 6% sales tax would not go to 5% it would go to 10%.
And by the way, the $X.99 gimmick still works on the vast majority of consumers as does Walmart and Home Depot’s $X.88 psycho-manipulation.
[Reply]
Mikey Reply:
May 25th, 2009 at 12:31 pm
Why not… that’s what happened during the Civil Wart when there was no metal for coins.
[Reply]
Assuming this kind of inflation in 7 short months you would have bigger worries than whether you were invested in silver!
Get real people!!!!
[Reply]
thomas Reply:
May 25th, 2009 at 9:52 am
very true soup- we have way more problems than people can imagine if silver goes this high. than again, i guess those who really understand the markets, aren’t on this forum.
[Reply]
spreadtrader Reply:
May 25th, 2009 at 11:13 am
Silver went up 6.00 in less than 4 months from November to February. Are you and thomas saying it can’t do that again in the next 7 months, or are you taking an off-hand, irrelevant comment about “$1,400 silver” out of context?
[Reply]
StockGumshoe Reply:
May 25th, 2009 at 3:50 pm
I don’t know what level you meant by “this high,” but yes, silver at $28 is certainly within the realm of short-term possibility even if inflation isn’t that bad yet (as long as inflation expectations increase), but you’d have to imagine that silver at $150 would mean that the sky was falling in some real way.
[Reply]
old man Reply:
May 30th, 2009 at 9:49 pm
Silver become used up in the sense that all those little electical outlets in all the houses have to have silver contacts. Silver is used up in purifying drinking water. ?In the old days before refrigeration, silver coins were dropped in milk to keep from ruining and to kill germs. Silver impregnated catheters are used in hospitals,and believe it or not there still many x rays made that need silver for processing,etc.
Travis,where the heck do you get your $1400 historical high in silver in 2009 dollars?
it is no where near that
[Reply]
thomas Reply:
May 25th, 2009 at 9:54 am
in 1477, it was this high. 2009 dollars. columbus’ timeframe.
[Reply]
The Silver Shots teaser also said they could be easily purchased and held in retirement accounts. . .not mine.
[Reply]
elissa stein Reply:
May 25th, 2009 at 2:25 pm
You can’t hold physical silver yourself ( or any precious metals), and have it be part of your existing retirement account. You would have to open up a separate retirement account- like with the perth mint, for instance, to hold the silver for you.
[Reply]
cgarvey Reply:
May 26th, 2009 at 2:37 pm
I read that you can hold physical metals if the account is a self-directed IRA. You store them with a depository that works with the company that manages the account. Been looking into them for a bit now.
[Reply]
Elissa Stein Reply:
May 26th, 2009 at 8:05 pm
right, you can’t hold it yourself. It has to be stored for you. You pay storage fees and management fees. What you can’t do is buy physical silver and hold it in your own vault or in your pocket and call it an IRA. Uncle Sam says no to that one.
Anon Reply:
May 31st, 2009 at 7:04 am
Sterling Trust Company in Waco Texas has Precious Metals IRA accounts.
The best thing about silver or gold coins is that when one sells them, if I may assume that most coin people tend to be sneaky rascals at heart, no income tax need be paid on any profit. (emphasis on sneaky rascal)
[Reply]
LS Reply:
May 25th, 2009 at 7:22 pm
Stone is wrong. One cannot sell silver and gold coins back to a dealer privately Every coin dealer asks for your drivers license and copies all of your ID information for his records. He will only pay you with a check which you must deposit in a bank account, so there is record.
[Reply]
The Long Wolf Reply:
May 25th, 2009 at 8:28 pm
It all depends on who you deal with in regards to paper work for coin selling, Eagles are still excluded. I have provided no ID’s, yet.Krugs,others, yes on ID’s for sales.
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Travis, I have been trading and listening to stock market advice for 50 years that has screwed me over and over(and over the years, have subscribed to just about every investment news letter out there)and you are the smartest person concerning the stock market that I have encountered. You have spent a lot of time and effort to gain the knowledge you process and I definetly “take my hat off” to you. I also have built websites and the workings of your website is one of the best thoughtout.
“One test is worth a thousand expert opinions”.
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StockGumshoe Reply:
May 25th, 2009 at 3:51 pm
Thanks John! Keep the compliments comin’, I appreciate it.
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The Long Wolf Reply:
May 25th, 2009 at 8:33 pm
Gum, you are the best since sliced bread. You need a real advice letter and If it was me, I no longer would provide free anything. Set up your web site to accept credit cards for your service. $25.00 every quarter until we say stop.
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StockGumshoe Reply:
May 26th, 2009 at 9:00 am
Thanks Wolf — and since you asked, yes, I do rely on the kindness of strangers (though few are strangers any more). It’s voluntary, but you do get a wee bit of extra Gumshoe goodness for your membership:
http://www.stockgumshoe.com/donate
There are lots of ways to play silver reasonably.
I purchased some call options on silver (commodities- not equities) and sold some higher calls, that expires in Dec 2009. You can do that reasonably and make a controlled profit ( or loss).
I also bought slw and sold some calls on that position.
I picked slv up as it fell (averaged down) and sold half of it when it went back up. The other half I held and sold calls against it. I am not a huge fan of SLV,because of all the chatter about whether or not physical silver actually backs up the etf, but it’s been a good play.
I never heard of a silver shot before, just a jello shot!
Hope everyone is enjoying the holiday weekend.
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StockGumshoe Reply:
May 25th, 2009 at 3:53 pm
Thanks Elissa — happy holiday to you, too … and it sounds like you’ve got quite a lineup of ways to play the field on silver.
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Excellent article. I like the idea of using Leaps (long term options like this) with minimal invested. If their wrong and silver plummets back to 9 bucks… you’ve lost very little.
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Ever try buying only one gallon of gas for $2.399, and argue with the attendant that you want change out of the $2.40 you tender to him?
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Holy smokes, just noticed the volume on the SLV Jan $17 options — either a lot of you got interested today and agreed that this was an interesting contract, or the silver shots promo is getting a lot of converts and they picked this exact contract.
Volume looks dramatically higher than any other SLV option — 8X higher, from a quick scan, volume is about half of open interest. If you decided to take a spin on silver in this way, I hope it works out for you. The price hasn’t changed dramatically with the volume increase, which is encouraging.
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Be aware of the madness, Gold wil l drop to 650, silver follows gold. Don’t be to early in this game. Play it in september for the January 2011 series.
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Am I missing something or does (100 shares) x ($133 profit per share) only equal $13,300, and not $133,000?
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StockGumshoe Reply:
May 26th, 2009 at 3:56 pm
Ooops — thanks for checking the math, I’ll fix that. The 11,000%+ is still right, I think (11,565%?), but I threw another zero into the number.
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[...] CLICK FOR SOLUTION [...]
The death cross trader claims you can use your IRA for this investment. I understand options are not allowed within an IRA. Am I wrong?
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StockGumshoe Reply:
May 28th, 2009 at 2:37 pm
It depends on your broker — there is no rule that you cannot trade options in an IRA, though some brokers might not permit it (it also depends on your approval level).
My understanding is that naked options are not permitted by most (maybe all) IRA accounts, but I know that many brokers do provide IRA accounts where more standard options can be easily traded, especially long options like these calls discussed here.
Personally, I have several retirement accounts that I manage (IRAs, Roth IRAs and SEP-IRAs) and options trading is permitted by two of my brokers and prohibited by one.
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spreadtrader Reply:
May 28th, 2009 at 4:30 pm
Gumshoe, when you say “options trading” are you including naked put sales? In a self directed IRA? If so, I ‘d like to know who your broker is. Thanks.
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No, sorry — no margin, so no naked anything.
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I am just learning more about stocks and the stock market. I wanted to invest some money for my parents recently, but we had to use it for something else.
My question/comment is: Is this a better and cheaper alternative to make some money investing than investing in regular stocks?
It seams like options could be a cheaper way and could be able to make more money, then to invest in some companies, than by buying stocks in those same companies.
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StockGumshoe Reply:
May 29th, 2009 at 10:26 pm
There’s no easy answer to that, though I think it’s important to remember that using any kind of leverage — and options are leverage, as is a margin account — dramatically increases your chances of a big loss, so it pays to be very careful and understand what you’re doing before you jump in.
There are lots of different ways to trade options, some much riskier than others — one good place to start learning is the (free) set of Options Institute tutorials from CBOE here: http://www.cboe.com/LearnCenter/Tutorials.aspx
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I think Dear Zachary is being modest, he and his brilliant copywriters wouldn’t lead us astray would he? i really do believe in my heart of hearts that silver can go back to $1400, and i think by this January. it’s very realistic! That means our $10,000 won’t be worth just 1.3 million like he said, but it’ll be worth a ‘gabajillion’ dollars! Finally, finally, i can buy that private island i’ve always wanted!
p.s. anyone who wants to buy a bridge, call Zachary, he has one to sell you.
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The land of oz (Australia) got rid of one and two cent coins some time back — as well as one and two dollar bills, to be replaced by gold (coloured) coins.
It would certainly make sense for the U.S. as the cost of $100 worth of cents and nickels (not sure of ratio) is about 40% more than the value of the coins!
Sound money is not about the jingle of coins as you throw them on the counter. LOL.
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I see silver above $17.50 when the New Year’s ball drops. I see a maximum this year at $22 +/- and $25 within the first 6 months of 2010. After that, it all depends on how much JPMorgan and the Fed manipulates the market for ill-gotten gains!
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What do you think of this statement coming from “Taipan Daily” . . . .
“Why Settle for Obama’s
$400 Tax Cut When You Could Legally Siphon $15,520
in FREE CASH From
His New Stimulus Plan?”
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How do I find out how to purchase these Silver Shots from the government?
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Sylvia Merrill Reply:
June 12th, 2009 at 9:10 pm
After returning back from Salt Lake City where we moved out of our home in 16 days (which was a killer), I found the article, “New Gov’t Regulated $1 Silver Shots poised to skyrocket $12,785″. I thought it was a good opportunity to get some extra capital. However, upon reading the material in the archives didn’t help and no one seems to know how to go about investing on line. I’ve searched many websites but no one gives out the information so you can move forward. I’m very disappointed that I can’t find the place to deposite my money. If you could be so kind to inform me where I put my money.
Thank You! Sylvia Merril (sylmerrill@gmail.com)
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StockGumshoe Reply:
June 12th, 2009 at 9:42 pm
Sylvia, if the article above describing silver shots doesn’t make sense to you, you probably need to do more research before speculating in something like the so-called “silver shots” — they are simply options contracts, they’re certainly not guaranteed in any way, and you’ll need approval from your broker to trade options, and you can read up on what options are at cboe here: http://www.cboe.com/LearnCenter/Tutorials.aspx
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Please,if you will, let me know how I may purchase some of these “silver shots” from the government.
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StockGumshoe Reply:
June 3rd, 2009 at 2:13 pm
If you read the article above, you’ll see that I think these “Silver Shots” are just options contracts. I can’t give individual guidance, but if you’re not familiar with options trading there are a few links noted in comments above that might provide some background.
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I understand the 6/21/09 deadline for neodymium in Greenland, but what is the 6/15/09 deadline for silver in relation to China?
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chap Reply:
June 5th, 2009 at 6:04 pm
Earlier this year the government of china awarded mobile phone licenses to its three biggest cell phone manufactures. The start of the test phase begins in june. Industry experts predict chinese demand for the upgraded phones will be enormours. That means they will need a large suppply of silver for the components in the phone. There’s the problem there’s a severe silver shortage. AS demand for silver explodes so will the price. The silver shots price have gone up i just bought 3 contracts in the options at 1.49 a share in the 17 strike price. 1 contract is 100 share. P.s make sure before you buy them you take them out untill jan. 2010 i’m new to this too but hope this helps.
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Another view on silver……this guy is selling calls on silver futures, not buying them.
http://www.libertytradinggroup.com/market-commentary.html
Notice that the author isn’t saying that silver won’t go to $20 by December, but he may be saying that it likely won’t go to $30 or $40 by then, and he tells you why.
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Does anyone know about Daily Wealth’s “Biggest Gold Discovery in the Last 20 Years is Right Here in North America?
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Jenae Reply:
June 16th, 2009 at 6:28 am
It’s either SA or THM, Canada is SA, Alaska is THM.
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StockGumshoe Reply:
June 16th, 2009 at 1:03 pm
Hi Monnie — wrote about this one here: http://www.stockgumshoe.com/2009/03/alaskas-secret-gold-mine-biggest-gold-discovery-of-last-20-years.html
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Darrell Reply:
September 25th, 2009 at 7:04 pm
The Big Gold Strike is in Alaska and is known as “Pebble” deposit owned by Northern Dynasty, a Canadian Company. This deposit will probably never be developed because of environmental objections and resistance from Native Groups. It is a HUGE find, but 2/3 of the deposit has been claimed by Liberty Star Uranium (LBSU-OTCBB)….if ever Northern Dynasty gets permits to develop a mine, Liberty Star would be a stupendous winner…it trades at $0.003 the last time I looked!!
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The sheep are about to get sheared Gold is at its high along with some silver prices. We are in the worst depression of centuries some time called deflation. The govt. is on a spending bliz to drive us further down in banruptcy; if this is possible.The govt.is now discussing how to falsifiy accounting procedures to further deceive.Credit has dried up. Lets stand back & watch to lose everthing when it blows. Maybe save our underwear. able1932@aol.com
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For those who like options, buy an option on a silver future is much more lucrative. You control 1000 ounces. The other advantage of the option on commodity futures is that you can buy three, six and nine month out options and when one expires replace it. That way you don’t have to be right about when the commodity starts moving. You will recover all your option losses. I did this in coffee, cocoa and silver many years ago.
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spreadtrader Reply:
June 14th, 2009 at 2:46 pm
“[M]uch more lucrative” than what? If you’re saying that there is more leverage with commodity futures and their options than a commodity ETF, that may be so. However, there is a price to pay for the additional leverage and there is no free lunch.
“The other advantage of the option on commodity futures is that you can buy three, six and nine month out options and when one expires replace it. That way you don’t have to be right about when the commodity starts moving.” Why isn’t that true with commodity ETF’s like SLV, all other things being equal? Are you saying that you can’t replace the expiring contract month in SLV with the next contract month?
“You will recover all your option losses.”……….is that a promise?
I’m sorry, but to the extent you’re trying to create the impression that you can’t lose money trading options on commodity futures; nothing could be further from the truth.
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For those who don’t like putting all their money on a number on the roulette wheel and hoping they get their fortune, there is a safer way to insure profit and still be able to sleep at night. Buy 100 shares of SLV and sell some fool the option to buy them at the higher price. It is a win-win situation. If silver drops and you lose some principal, you still have the option premium and the 100 shares for which you can sell another option.
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spreadtrader Reply:
June 14th, 2009 at 2:25 pm
Of course, you make this all sound simple and risk free (“a win-win situation”). Yet if you’ve done it, you know it ain’t so; and you provide us with no real life scenario to work with…….so I’ll supply a few and you can answer questions for any novices to whom you haven’t fully disclosed the risk of doing this trade.
Let’s say I run out and buy 100 shares of SLV on Monday’s open at 14.63 and promptly sell 1 July 15.00 call for .55 cents ($55). Of course, the farther out-of-the-money you sell the options, the less premium you take into the account. The options expire July 17th. Here’s what could happen:
Scenario #1: SLV closes at (pick a number) 17.80 by July 17th and my SLV stock gets called away at 15.00. What have I made? $55 +$37 = $92. If I nixed the option trade I’d be holding my 100 shares with a paper profit of $317. Yes, you “win” $92 (about 6% on your $1,463 for 1 month) with the option trade, but you make three times the money without the option. Of course, SLV could be higher than 17.80 on July 17th.
Scenario #2: SLV closes at (pick a number) 14.75 by July 17th and you continue to hold your stock with a $12 paper profit and option premium of $55 for a total of $67. OK, that’s not bad, but you laid out $1,463 to obtain that return (4.5% for one month). The question becomes, what are the odds SLV will essentially stand still for one month? And this takes us to an assessment of the RISK in Scenario #3.
Scenario #3: (this is why I wouldn’t do this trade) SLV closes at Fibonacci support 12.86 by July 17th. You pocket $55 premium and have a $177 loss on paper for the 100 shares you are holding for a net loss of $122 (-8% for 1 month). You say “If silver drops and you lose some principal”, you keep the premium and “you can sell another option”.
I don’t know about you, but I don’t want to risk losing 8% two months (or more) in a row. Of course, SLV could go lower than 12.86 by July 17th. What is “win-win” about that?
There is a time to sell covered calls, but I don’t think that you’ve identified those times for novice investors. Generally, the best time is when the underlying stock price is at or near overhead resistance AND option implied volatility is HIGH. Presently, option implied volatility is not high. It is not low, but it is not high enough to make the risk of a decline in the stock’s price worthwhile…….for me anyway.
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Stumbled upon your website after trying to do research on ’silver shots’ after getting an email from Investment U.
Besides a great analysis here, your writings are also a firm warning that people can and will say just about anything under the guise of ‘useful investing information’.
Many thanks.
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Strong Eagle Reply:
June 14th, 2009 at 9:49 pm
Thanks also to spreadtrader and others for providing additional insights.
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“Silver Shots”
Zachary Scheidt’s advertisement of “Silver Shots” sounds almost word for word like the ad for “Silver Shots in Taipan Daily.
This is another “Agora Financial” newsletter put out by Porter Stansberry and Steve Sjuggerud from Daily Wealth. All from Agora Press.
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StockGumshoe Reply:
June 16th, 2009 at 1:07 pm
They copy each other all the time, but they don’t usually copy the exact wording … wouldn’t be surprised if the ad you saw, once you clicked through to it, ended up being the same ad for this Death Cross Trader service.
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I don’t think that the “silver shots” is SLV because the teaser says right in the beginning “Forget about silver coins, ETFs and silver mining stocks”. I think that these “silver shots” are silver pellets that jewelers use to make jewelry. Does anyone subscribe to this service that can confirm that SLV is the play?
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StockGumshoe Reply:
June 16th, 2009 at 1:06 pm
Indeed — sneaky, this isn’t an ETF … it’s an OPTION on an ETF. Wherever the wiggle room is, a copywriter will find it.
It’s definitely not silver pellets, which are also sometimes called silver shot — that’s just physical silver, you can’t usually buy it at less than melt value — and you also can’t get easy access to leverage to control a lot of it if you’re an ordinary investor, the way you can with options. You might do fine owning the physical metal, but you don’t get the outsize leveraged bet (or the risk) that you do with buying options contracts.
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Well, price for silver is in the toilet. The whole scheme collapsed.
Whoever bet on those so called “Silver Shots” are now in a lot of hurt.
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spreadtrader Reply:
July 10th, 2009 at 3:11 pm
I dunno……I’ve seen sicker dogs than this get well.
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StockGumshoe Reply:
September 11th, 2009 at 1:14 pm
As it certainly did this time — that contract’s back above $1.30 now. He has a new pitch for the “Silver Shots” out now, I’ll have to look at it and see if he’s changing the contract he likes, though it could easily be the same one again or, if you want to be a stickler about the dollar price, the $18 strike for January.
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Silver Master Reply:
September 11th, 2009 at 5:36 am
@WallStreetKid
Is it really? bit clueless are we?
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Just to complete the picture, there is also an etf that’s the 2x inverse of silver: ZSL. It’s good for hedging silver bullion if you don’t want to be trading your core holdings. It used to be very thinly traded, but lately has been very liquid.
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Most people are bullish at tops and bearish at bottoms.
The pre-1982 95% copper penny is worth 1.7 cents, which is why there is a $10,000 5 year prison term for melting them down.
http://www.coinflation.com/
JubileeProsperity.com
http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID3251493
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