Silver down for the year — Portfolio Update: closing silver shorts

What a year for silver, the restless metal. It is now about to close the year down, after being up as much as about 100% in late April.

How many people where forecasting a drop in silver back when it was trading above $40?

SLV is trading at $26.50 as I'm writing this post.

As you can see on the SLV chart that I'm using as a proxy, the drop was nice but not as dramatic as the rise, which allowed for people to remain extremely bullish — including the crazy lunatics Eric Sprott and John Embry who bet the house on Silver... 

As you know, I have been short silver since the $40 and nicely profited from the drop. In October, and closed my $42 and $40 puts on SLV and acquired a bunch of $30 puts on SLV.

With only 5-6 trading left on those puts, I have decided to close the position, with an extra gain of +86% although I expect the drop to continue over the next few months. A rally in silver should be expect at some point, given that the drop from about $35 to now close to $26 didn't see much resistance. I will use any such rally to enter a new short position.

Please note that all the options are on the table as I might use further weakness to bet on a short term gain as well.


Tiho said...

This post will be remembered as a bottom, while you are still talking Puts and shorting!

pej said...

Tiho, dude,

Sometimes, I feel like you disagree with me for a good reason. And sometimes, I feel like you are just looking for an opportunity to rant and moan.

On this post, I mention that I am closing my shorts, and that I would expect a bounce in silver. Yet, you make another completely unrelated comment. Have you actually read the post?

pej said...

PS: I actually went long silver for 3 days. Position closed now. Maybe I'll do it again, maybe not!

Tiho said...

Hahaha. When Silver explodes in coming years, you will be shaking your own head at how low you could have bought, and instead you were talking about Puts.

Then you will finally figure out that it was not a rant and moan - it was a huge opportunity in front of you that you were too blind to see. Blinded by your narrow mind!

Either way, the market will decide...

pej said...

Interestingly, when I'm wrong you make fun of me, and when I'm right, you make fun of me. I'm still puzzled about your motivations.

Tiho said...

I'm just competitive.

And the reason I'm laughing is because it doesn't take a lot to be right or wrong for 3 days.

What is the point of that? Try to be right on a proper call and hold it as it occurs throughout time.

Like Jim Rogers... go out and buy $200 million worth of commodities in 1998 and hold it until now, even through 2008, and than when you see them making new highs still in 2011 and now bottoming, and going for yet another high - that is REAL SKILL!

pej said...

As I told you many times — but you tend to forget — I also know when to buy and hold. I already have mentioned several times that I've loaded up on physical silver at 9$ — I have actual 100 oz bullion bars in my stash, along with gold bars and coins. Ideal for long term (20-30 years) holdings.

In addition to that, my oldest position is AAPL, bought at $13 ($26 before the split in 2005). Worth $457 each share. I'll let you do the math in terms of the % return :-)

I just happen to not find Silver at $30 to be an interesting buy-and-hold entry point. I'll buy more for the long term when it's back in the single digits.