Closing time…..

Posted on 08/12/2011


……you don’t have to go home (or into cash just yet), but ya can’t stay here!

A couple days ago I wrote about the power of implied vol (the great unknown in the derivative value equation) and they are finally coming in (going lower) in the Silver market.

Two weeks ago I recommended a short premium, delta neutral (directionless) position in Silver. I expected Silver to remain below 45 and above 35. It’s been compliant by one measure, but vols went nuts in the interim.

Rather than tempt fate (or the resolve of the Germans or the ECB to backstop periphery debt), I think it’s advisable to CLOSE BOTH SIDES of the strangle and move on.

Right now you ought to be able to do so for .30 (or $1,500). Assuming you sold the position for ~.65 (or $3,250) you should make $1,750 less frictional costs. Better than a poke in the eye!

Sweat that one out! I expect another pop in vols (across numerous markets) before too long, so it’s good to have some gunpowder when there’s “blood in the water”. When people/market participants panic they make poor decisions and that presents great opportunity for those that aren’t handcuffed by a bunch of losing positions.

45.000C 0.099 0.105 0.085 0.101s -0.047 12:49 505.00
35.000P 0.370 0.370 0.200 0.211s -0.180 13:06 1055.00

Happy Friday.

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