Another Fortuitous Adjustment for SLV

In this article dated 1/13/16 I highlighted a bullish position using options on SLV.

In this article dated 2/9/16 I adjusted the original position in order to lock in a profit, retain upside potential and extend the length of the time available for SLV to make a major move.

Things have gone pretty well. But most recently (here and here) I wrote about some potential reasons to be less than bullish about the prospects for silver –at least through late June.

So this raises the question: What to do with our SLV bullish option position?

(See also JayOnTheMarkets.com: Where NOT to Invest, Er, Soon (Part 1))

Adjusting SLV One More Time

The current position is displayed in Figures 1 and 2.

Figure 1 – Current SLV Open Position (Courtesy www.OptionsAnalysis.com)Figure 2 – Risk Curves and status for current SLV Open Position (Courtesy www.OptionsAnalysis.com)

At the moment:

*The open profit is +$2,954

*The maximum profit potential is +$8,014

*The minimum profit is +$1,014

In other words, the trade could gain another $5,050 or it could give back $1,940 of the current open profit.

One choice would be to simply close the position and take the profit. But there are two factors that lead me to go a different direction:

1) Silver is “on the move” – and historically precious metals possess the potential to surprise people with just how far they can run in either direction

2) Because I trade options, it is possible to improve the existing position

The Adjustment

The adjustment goes like this:

*Sell 10 Jan2017 SLV 15 calls

*Buy 10 Jan2017 SLV 22 calls

*Sell 9 Jan2017 SLV 17 calls

*Buy 9 Jan2017 SLV 24 calls

Among options geeks – er, sorry, I mean options “traders” – this is typically referred to as “rolling up”, and we are exiting a position at lower strike prices and trading new options with higher strike prices.

The net effect of this adjustment appears Figure 3 and 4.Figure 3 – New SLV position after adjustment (Courtesy www.OptionsAnalysis.com)