Are “Silver Strikes” 36X Better than Dividends?

Sleuthing Christian DeHaemer's teaser for this "one illegal technique"

By Travis Johnson, Stock Gumshoe, March 6, 2013

Almost every ad that refers to options in some oblique and secret way likes to throw in the fact that this is now a sector that is “regulated by the U.S. Government” … but it it “used to be illegal.”

Which makes it sound both more exciting, and safer, than it is really is for most individual investors.

So yes, Christian DeHaemer’s new ad, for his Options Trading Pit (that’s the newsletter that used to be helmed by Ian Cooper) is touting some sort of silver-related options trade.

I have written about DeHaemer’s teases many times over the years, for several different newsletters he has run, but he’s never particularly been touted as an “options trader” guy — he’s known to me as a frontier markets risk investor, someone who looks for the big potential, high risk stocks that we’re not supposed to have heard of. And he has certainly picked some doozies over the years, including Africa Oil back in 2011 before they struck oil in Kenya on their first try and shot up 500% (it’s come back down a bit since, I own those shares personally).

So now he’s pitching an options trading idea that he calls “Silver Strikes.” What is it?

Well, he hints around that he’s got three silver strikes to recommend … but doesn’t actually provide any clues about what they are, specifically — other than the fact that they each trade for around a dollar.

So I probably can’t name the specific trade he’s touting, but I can give you the general idea and some possible examples.

DeHaemer calls his “system” for finding picks the “hammer, trigger, and spark” system — that basically means a stock has been “hammered” down, the stock recovers a bit in a “trigger” move but then declines again after that, and then something sets off a “spark” to send the stock back past that trigger point and higher. Which looks good when he shows the charts of a few stocks this has worked for — but you can, of course, come up with a historical chart that shows anything you want it to show.

He also clearly thinks silver is going to shoot higher in 2013 — a common assertion among the investing punditocracy and a sentiment I’ve heard trumpeted loudly from most of the newsletter families over the last three or four months (particularly for Stansberry and the rest of the Agoraplex, which also includes DeHaemer’s employer Angel Publishing). Not everyone’s on board with Eric Sprott in predicting $100 silver, but there are a lot of folks who think silver is going to snap higher — whether because the “manipulation” of the silver futures markets will be unwound or just because investor demand has ramped so much higher over the last two years and recovering industrial demand will mean supply just can’t keep pace.

(The manipulation story comes from the assertion that JP Morgan and other banks are shorting heavily to keep silver prices down, perhaps in collusion with the government or, depending on who you ask, the Trilateral Commission or the Illuminati or whatever other bogeyman you can imagine — yes, I know at least part of that story of futures manipulation is likely to be true, I just don’t know if there’s really a deep conspiracy or if said manipulation will end or has ended).

Here’s DeHaemer’s take on the shiny stuff:

“As Silver Demand Blows Through the Roof…
‘Silver Strikes’ Gains Will Be Explosive

“You don’t have to be tuned in to the latest financial news to understand that silver demand is absolutely off the charts.

“Couple that with the fact that supply is historically low, and you find yourself in a situation where silver prices can do nothing but explode.”

And you can easily build a case for this story of outsize silver demand as the calendar turned to 2013 — investors were snapping up silver coins faster than the mint could make them, so the U.S. Mint did briefly have to halt and ration the sales of American Eagle coins (those are the basic 1 oz bullion coins that the mint is required by law to mint and sell — not the fancier collectible versions that they often have to halt sale of if bullion coin demand is high, since both collectible and bullion coins use the same silver “blanks”). January 2013 set a new record for silver coin sales by the mint, and that’s after several years during which silver coin demand has been far, far higher than we’ve seen for decades. That rising demand coincided with the move in the silver price from the $10-15 range up to the $30+ range over the last five years or so — though the investor interest really spiked in the Spring of 2011, when silver shot up to almost $50 for a very brief few moments. Silver and gold have performed similarly over the last five years, and their prices have reacted to the same stimuli most of the time, but silver has been far, far more volatile.

And whenever you have the potential for high volatility, you have folks looking at options as a way to capitalize on those big moves.

So we’re told that DeHaemer’s “alerts” are triggering buys that could get you 35X your money by June on these “silvers strikes.” Here’s how they put it:

“In the case of these now-legal ‘Silver Strikes,’ his alerts have already been going off like crazy.

“You may know there was a massive silver sell-off in 2009 during the market correction… Well, that’s the hammer.

“You might also be abreast of the fact that silver started moving up in 2010 due to QE1 and 2. That was the trigger.

“But here’s where the real action begins…

“As I showed you earlier, silver demand is reaching critical levels. Production is slowing due to this increased demand.

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“Things are hitting a fevered pitch, and the spark is set to send silver to unprecedented levels — giving savvy investors access to potential paydays the likes of which they’ve only ever read about in financial success books.”

I have no idea whether there’s really a “spark” in the silver markets right now — like gold, silver recently had what some folks call a “death cross” on their charts, when the 50-day moving average dips below the 200-day moving average, and both of those moving averages are declining for silver, so a lot of technicians are nervous about that. I’m not a technician and I’m not particularly worried about gold or silver in the long run (I expect them to hol