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A picture is worth a thousand words. This was so
embarrassingly obvious, too bad we didn’t get a chance to put together
an option play on it due to how fast it went down.
 
UPDATE: Perhaps this is
a good time to mention that there is a wealth of information in the comments
section of the Metal Augmentor website (most of it accessible only by subscribers)
in addition to the official posts. You should get into the habit of reading
those comments and maybe even participate yourself. In any case, here is a
little comment from Tuesday:
May 4th, 2010 at 16:39
You are probably right, perhaps some puts in the USD although it had a
beautiful chart today for such a supposedly ugly currency! I was looking
earlier at July COMEX silver call spreads because when volatility is high the
straight spreads (bull or bear) can sometimes be “affordable”.
Nothing doing so far, however, and I’m actually tempted to look for
outright long calls in COMEX silver JUNE in the 18.50 - 19.00 range. Yes,
June is not an active month but we are in an interesting period and whatever
is going to happen (follow-through, reversal) is probably going to happen in
3 weeks or less. I doubt we flatline here but of course that is the risk.
And then on Wednesday there was this one:
May 5th, 2010 at 14:39
[David makes a point]: I still think the July contract would be better
for Silver because I do not see it bouncing right back especially if we get
to 16. The damage is done. And with gold breaking below 1160, it will be that
much harder for gold to climb back to 1200 range soon.
Crude is looking attractive at 79ish here. I took a lightly long
position at 79.19. I’m looking at adding if we get below 79. The
positives for crude are 1) continued signs of economic recovery (or at least
the repeated drumbeat that we are in an economic recovery), 2) the upcoming
peak summer gasoline demand season, 3)potential for the Gulf oil leak to
disrupt imports and refinery output, and 4) Opec’s desire to keep oil
in the 75 range meaning not down to 60 any time soon. Negatives are fear that
demand and economy will remain weak and supplies high.
Sorry, I know this is not Oil-augmentor, but I don’t mind
speculating in oil at these prices, but I am timid about silver and gold.
[silverax responds:] Au contraire, silver did jump back up when gold
diverged last time and today we are seeing another major divergence with gold
actually up but silver still down over 40 cents. I bought a June 18.50 silver
call for $700 just in case we get a repeat of what happened last time. Should
we we get just a slight recovery in silver back toward $18.00 I will try to
sell a 19.00 call for $700 to set up a risk free trade.
As a postscript, I just went ahead a few minutes ago and sold the call
option (a bit early I might add) for a tidy $1,500 profit after commission.
Probably one of the easiest 1.5G’s I’ve ever made.
Tom Szabo
Silveraxis.com
Tom Szabo introduces
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