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« Endeavour Silver Corporation Update 15 August 2009 | Main | Silver Wheaton Corporation PUT Options Up 93% in One Week »
Friday
Aug142009

Silver Wheaton Corporation Options Trade Update

Just a quick update on our options trade on Silver Wheaton Corporation (SLW) which trades on the Toronto and New York Stock Exchanges.

We purchased the August 2009 $10.00 PUT Contracts (SLWTB) on 5th August 2009 for an average price of $0.375 per contract and they have traded as high as $0.75 for a gain of 93% before silver decided to put in a rally sending SLWs stock price back up again to close at $10.02 yesterday.

This reversal has, along with the erosion of the time premium, knocked the price of SLWTB back down to close with the bid at $0.25 and the asking price at $0.30. In hindsight we should have closed at $0.75 or so but decided to retain some discipline and hold on for one more day with the view to closing at 100% profit or more, but thats hindsight.

Now we are entering the last week before this series of options expires so we have reduced our sell order to $0.50 and will play it by ear next week as it could turn into a damage limitation exercise.

If you have a comment, whether you agree with us or not, then please feel free to add it to the article via the comments box.

Have a sparkling weekend.

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Reader Comments (6)

wow you took a really risky trade had 93% profit offered to you and you held out for 100% are you guy's crazy? what does 7% matter? Take the money when it's offered! Also if you wanted to hold out for the full 100% why not say well if I'm wrong and the trade reverses let's put a stop loss in at .50! Now your down facing a loss on this trade and your willing to accept .50 as a good result?

If only trading were that easy!

Really appreciate your honest accounts and guts. God knows I have done that trade one way or another so many times. I think the art is to realize where you are with the trade at any given time and think what's the worst and best case scenario and how do I limit my risk. My priority is to get my money back asap then what ever is left I can't lose. Easier said than done.

August 15, 2009 | Unregistered Commentertom

Tom,

Its hard to disagree with you as we missed the 'moment' however when we go into a trade we set a plan and try to stick with it. We can look back now and sure it was a mistake but we don't know that on the way up. With our PUTS on Randgold recently we managed to achieve 100% profit in one month by sticking with it, we also made 100% profit on Agnico-Eagle and GLD options earlier this year. The difference this time is that we needed to be in and out fast as we choose the series closest to time now – I think we wrote that it was a 'hit and run' trade so we should have been more flexible about the exit.

Now if we apply your theory of taking the cash early then the opportunity to double our stake on those earlier trades would have been removed.

Its a tough old call all right.

Thanks for your comments, its really appreciated that you took time out of your schedule to respond to us.

August 15, 2009 | Unregistered CommenterSilver Prices

Maybe that will teach you guys not to play around with options, nor offer encouragement direct or not to do likewise by your readers. Particularly in precious metals where the markets frequently changedirection in seconds, playing with any derivatives is only for high rollers who can lose , then lose again, then ask for a new deck.

August 15, 2009 | Unregistered CommenterR

Thanks for your reply. The "moment" as you say is very limited when trading the front month contract because of time depreciation and volatility. The reason you can achieve a gain of 93% in a couple of days as you know is because your trading the front month and the risk is magnified. You recognized the opportunity in SLW because you were following and you were right. I thought when you posted that the options were at .75 that you were selling! what a gutsy trade! to hold out?

It's great you guy's post what you are doing and how you think. I find it really useful to follow and really appreciate it here in the UK. We all know silver is the place to be and of these stocks potential. keep up the good work.

August 15, 2009 | Unregistered Commentertom

Many thanks Tom.

August 15, 2009 | Unregistered CommenterSilver Prices

I really like the way you post your trades. I am following your trades and it helps me to learn. Actually I bought the options with you and I still hold and it is my first options trade. I now think that we could have sold some contracts at .75 to lock some profits. But that's ok, it's all learing.
Keep up the great work..

August 16, 2009 | Unregistered CommenterRaghu

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