Long put spreads on SLV and GLD initiated

I initiated a relatively small diagonal spread on SLV and a short term (sept) calendar spread on the GLD when gold was trading at around $1,900.

I wanted to have a reasonably small risk on those positions, and hoped to grow them bigger, but funny enough, the market decided otherwise, and gold had a reversal just a few minutes later.

Given my trades, if SLV and GLD fall too rapidly, I will actually make very little money. But if they fall say mid-September, then it will become a very profitable trade.

Wait & Pray.


Tiho said...

Praying is not a bad strategy hehe! It seems you are always buying options... is that the way you trade?

Statistics are something like 90% of all options bought expire worthless. That is why I hardly ever buy options, but I did just recent with a plain Gold Put.

pej said...

Praying is the best thing! May GOD help us, hahahaha.

Anyway, I do trade quite a lot of options when I see opportunities, but I also trade FX, Futures, Stocks, and create strategies including options on these as well.

Those statistics might or might not be accurate, but as you know, statistics show that 90% of the "investors" lose money trading shares, but you don't hear people saying you shouldn't trade stocks, right?

Anyway, I will make yet another post explaining the + and - of options, as silly comments such as this one are spread even by very clever such as Jim Rogers.

BUT before trading options, there's a long learning curve, as the non-linearity and the greeks are misunderstood by 98% of the people.

Tiho said...

If it comes from Jim Rogers, it can't be silly.the guy took $600 and made a billion out of it. And he made every mistake known to man before finally arriving there. I'm pretty sure we are all silly compared to that. As ey say... Money talks and bullshit walks!

pej said...

Hey Tiho

Good to see that you love Jim Rogers, cause I do too and have read all of his books and listen to his interviews all the time.

The guy is definitely a genius. But it doesn't mean that he will be 100% correct on 100% of his statements — proof? he keeps on losing money shorting the treasuries. Another proof? He's loaded with Chinese equities crap.

Anyway, back to his particular point, an easy way to debunk the statement is that if he truly believes options are a rip off and that 90% of them expire worthless, then he should probably sell truckloads of them and make hundreds of billions, right?

Hint: I do buy and also sell options.

Hint2: my gold calendar spread is now out of the money on the short leg and I'm close to make 100% profit on it — if only gold could stay about where it now for a few more hours — while also already up about 50% on the long leg. This in 3-4 days, not bad, right?

You just have to spend a tremendous amount of time understanding options. They are not for the fainted heart indeed. That same short leg was down 540% in 24 hours, so the guy who bought it was in the money, multiplying his investment by 6 in 24 hours. :-) But that option is now about to become worthless.

It's definitely not recommended for people with long time horizons and risk averse. You seem to be doing very well with your style, so stick to it and improve it even more! :-)

Tiho said...

Your proofs are only partially right and majority wrong and unfortunately that is what happens when you only skim the surface of things.

Jim Rogers bought Chinese equities in November 2008 - the pure bottom. That is amazing! Who the hell buys a bottom pip every time? Jim! He is not wrong, he is actually in the money as we speak, despite all the selling of idiots who bought at the recent top. And he said that he purchased them during the crash of 08 and plans to hold them for his children's children. He said that if you sold US equities in 1907 you looked like a genius for a couple of years, but a total idiot for the next 5 decades. I guess Jim Rogers knows how to make money and not be right for a short term time frame...

In regards to Treasuries, he doesn't "keep shorting them". He shorted them in October 2010 and nailed the top. He covered in February 2011 at the perfect bottom. What a genius. He just shorted them in June of 2011 and got it wrong. Or did he? But since you didn't listen properly, he said that he is convinced that this is NOT the top and that a big rally in Treasuries is coming, which will be a short of a century. He also said that his position is so small that he is just testing the market , something that a billionaire can afford to do easily - and something Jesse Livermore used to do before big investments. Here we today and we got a big rally and the man will nail the top just like he always does!

I also don't trade like you, no disrespect however - as I wish you all the best and hope you make as much money as possible. I invest more like Rogers, because the truth is no one actually has met a trader who is rich yet... However, there are plenty of long term investors who became billionaires. I am actually very happy with my investments and they are very big returns, however they take time and patience and sticking with proper outlooks, not short term noise.

What is the use of making 100% return on small peanuts money and trading over and over again? No offence, but not even the greatest traders can keep winning all the time and just like the probability in other games, over the long run your odds are difficult to consistently outperform - proof? Forbes list of billionaires doesn't include one single trader... but has many many real estate and market investors!

At best, great traders work for big investors, who allocate a certain percentage of their funds capital to the high risk strategies of a trader. Soros use to dedicate only 2% of capital to Trader Vic - amazing trader - but him and Rogers used to control the 80% of the main fund and returned 45 times!

As for his skills, Rogers bought the Yen in late 07 and is still making huge returns, Rogers bought the Euro in June 2010 at pure bottom and is still making money, Rogers shorted Citigroup at the top and covered when it hit 99 cents, he bought commodities in 1999 two weeks before Oil bottomed at $15 and still holds it and is up huge money, he shorted banks in February 2011 and is up huge money, he is long the Dollar since May 2011 and is up money, his up money on Chinese stocks, BHP & Rinto Tinto, Swiss Franc, Aussie Dollar, Kiwi Dollar, Gold, Silver, his up on EVERYTHING and his being holding some things for longer that you and I have been alive!

Making 100% return in 3-4 days on small money is nothing special. What I wrote in the paragraph above is very special. That is why you and I write a blog, and he has a billion! That's the honest truth buddy, so I suggest you learn from the best, not from the average. But hey... its up to you!

pej said...

I think you forget that Forbes ranking is only about people who have somehow publicly listed their wealth. There are many many billionaire hedge fund managers, as you can see on the headlines in the past few weeks and months.

That said, Jim Rogers is definitely great. Yet, he's been shorting and shorting again the Long Bond, not understanding the deflationary period we have entered.

As I mentioned several times, I do hold long term positions when I see value and compelling opportunities. It's not the case at the moment.

Generally speaking, my portfolio is up more than 100% since August. So it's not tiny option positions, it's targeted, low risk high probability trade, with minimum duration given the extreme volatility of the markets.

Finally, and please do not take it the wrong way: it seems to me that you are a great trader or asset manager, however you want to call it, but you are a bit over-confident about your abilities and forecasts.

I don't think you were trading during the collapse of 2008 and 2009. That was an invaluable experience to me. Not only because I made a lot of $$$ but also because I learnt so much about myself and the markets.

I bought silver at $9 during those days. Do I want to buy it at 40 or 50? no, I prefer to sell it. And you were mocking me for when I was shorting it when it traded for $50, but you are now shorting it at $40 :-) I'm glad you changed your mind though, but I happen to have just closed my very short term short positions on SLV yesterday, with a gain of 70%. I think we'll rally for a few days, and then fall again, so I am positioned accordingly. I aim at SLV >= $40 at the end of the week. I might be wrong of course!

Tiho said...

Geez 100% up since August. You must be breaking all records!

I was trading throughout 08.

I haven't changed my mind on Sliver. I'm extremely bullish. Read my post on it when I shorted it. You would be crazy not to buy Silver below $40 or even $30. I'm not gonna bother explaining why anymore.

On top of that I never change my views, despite of what I do with my funds over a short term. For example, I'm extremely bearish on the Dollar, but I own it currently because the market is telling me to own it. Will I own it for several more weeks or months? Maybe or even possibility. Will I own it for several years? No way, the dollar is finished.

Basically, I'm saying that I am not a perma bull or perma bear. I read your blog between 08-09 and I failed to see where you went long "anything" including Silver. I already said is before, but I cannot see anything other than fear mongering, deflation worries, riots and wars and end of world predictions.

I'm not as successful as you are, I have never returned 100% in one month. I am not sure how much money you trade with, but it sounds like you are killing it. Can you manage a few hundred thins dad of my money and double it in a month? I wouldn't mind getting a free Aston Martin one of these months?

It's impossible for me to be over confident about my abilities to forecast markets in the short term - I am nowhere as good as you say. I am a terrible short term trader, like yourself. However, I have great ability to forecast over the long term and it is not that I am overconfident or good, it is just that I have two basic things on my side:

History and demand / supply. They always work and never fail! Just ask Mr Rogers, that's how he made billions. I also am not going to bother explaining this either as I already have.

On the topic of Rogers, unlike you, the man has already priced in deflation. He is now pricing in inflation. You see after a 30 year rally in bonds, deflation story is done. It's run it's course. He is pricing in the next 30 years of inflation trying to pick a bottom in yields. That's why he keeps trying to short it! Don't worry... I can see you don't get it... otherwise you would be saying it.

You are more of a adder, your time horizon seems to be smaller as far as your blog posts are. Nothing wrong with that, since you double money in a month.

Tiho said...

Few autocorrect mistakes when writing on the iPad. Just read between the lines. ;)

pej said...

I'm not making 100% every month dude :-)
Though if things continue on this track, I will make another 100% in sept.

That said, I manage only my personal money and one friend and a family member. My ambition is not to buy a ferrari or a bentley. I don't need them in Singapore. And I'm not a show off kind of person.

My objectif would be to follow Marc Faber and Jim Rogers: be 100% independent of a day to day activity and travel the world while being financially secure.

What about your fund?