SLV - broken winged butterfly and call ratio backspread

Looking at the actions of gold last week, it is believed the bullish momentum will continue. Any corrections just intraday.

Since my GLD call ratio entered on Sept 09 expired last week with a profit of 300%, I decided to enter more trades on SLV and GLD.

Despite, the overbought situation, I believe we have entered scenario 2 and 3 outline in the previous post. Some of the momentum are certain the results the short squeeze by commercial traders. The trades below are suitable for prices that are overbought and the belief prices will go from high to higher highs. Instead of chasing the stock, it is structured that if the direction is wrong, we will lose little or make even a small credit.


1. SLV - Broken Wing butterfly

BTO Jan 18 Call / STO Jan 20 call - 2X / BTO Jan 21 Call for a debit of .6.

PE: Close the trade When when the ROI hits 200% or at > 1.8.

SE: I struggled with the SE. The first idea is to break down the trades into 2 - a bull call 21/20 and a bear call 20/21.

The bear call is an ITM trade. So credit is high and risk is minimal. It should be allowed to expire on its own. With the bull call, we will aim for maximum ROI of >25%.

So the SC is to be prepared to take a loss of .6 for 1 contract if SLV collapsed. In this case you will take the maximum risk of the bear call and the bull call. This is not a likely scenario given the current bullishness of the precious metal market. With this trade, time is on my side. If the trade stays >18.5 during Dec or at expiration, it will be a good trade. (see diagram )

If it goes up, it will be great trade.

If it collapse, I will take the maximum loss.

2. SLV Call backratio

STO Jan 17 Call / BTO Jan 20 calls - 2x for credit of .3

This trade requires SLV to move up or down. If it get stuck by expiration at 19, 5there will be a loss of 1.6. But if SLV drop below 17 by expiration, I will collect a credit of .3. If SLV goes in the direction expected, the profit is unlimited.

PE: If Silver continues to be bullish, hold on to the trade until end Dec where the time decay effects start to kick in and also if silver shows signs of a correction. Currently, it is overbought but the momentum is huge and thus silver could easily rise any 10-20% before correction. The ROI could be huge. Will exit the trade by end December if SLV shows signs it will slide back to 19-20.

SE: The reverse is true for this trade compared to the broken butterfly. Time is not on my side. The trade must move. It is similar to a straddle or strangle where time decay will kill the profit.

If SLV show signs of getting stuck in a range at 19 by beginning December, close the trade or convert to a calendar trade by sell SCs at a higher strike to the bullish side of the leg.