Just Closed Out an iShares Silver Trust ETF Options Trade for Handsome Profits

There is more than one way to participate in the high flying, extremely profitable silver market.  You don’t have to be swimming in the high stakes silver futures market to get your piece of the action.  SST does excellent in that market of course, but you can just as easily use the strategy to trade SLV, the iShares Silver Trust ETF.  Like all ETFs, it trades just like a stock.  Best of all, it has a very liquid options market and with the multidimensional approach that SST offers, you can really lock in some handsome gains.  Check out this recent trade.  I just closed it out today.  In fact, it closed on its own while I was out running errands.

Since March 30th, we’ve been getting set-ups to reenter the uptrend using a 195 minute chart, one of our favorite timeframes to swingtrade with.  We had one on the 30th which canceled, and then another one on the 31st which also cancelled.  We then got a 3rd setup on April 4th.   This set-up remained in effect and did not cancel.  We saw 4 bars print before the 5th bar actually triggered us in the trade.  Since we were at significant high levels, I made a small adjustment and actually took my entry a couple pennies above 38.  I took a three position trade buying May 37 calls.

Why May 37 calls?  First of all, I could have actually bought April calls and would have wound up making a larger return (they were cheaper, with less time premium than the May calls).  I decided to go with May because I like to put on an options trade that had double ‘my average hold time.’  After reviewing my charts, I felt that the April calls would be cutting it too close.  For strike prices, I like to choose 1 or 2 strikes in the money from the SST entry.  The SST entry was 37.88.  Hopefully you understand this but if not, don’t worry.  It’s quite easy and we discuss these details all the time in the SST Owner’s Club.  Once you learn a few simple details, you can apply them over and over again.

The first position exited at the 2nd target, 39.07.  A straight stock trade (or ETF as in this case) would have resulted in a 3% profit.  I got filled at 38.02 after my adjusted entry for a 1.05 profit.  1.05/39.07 = .027%.  I wouldn’t mind taking a 2 or 3% profit all day long.  Trading the May 37 call option resulted in a 35% gain though, which is nearly 12 times greater on a percentage basis with the exact same trade set-up.  Knowing how to use the instruments available to you as a trader is a very valuable piece of information, as this simple example demonstrates. 

The price was unable to hit its full and final target, which uses settings based on a well researched customized tradeplan.  The trailing stop was hit today, exiting the trade at 39.38, for a 39% gain each (2 remaining positions). 

This is a typical SST Options trade.  Very simple and easy to manage.  Even if you used the straight out of the box, default indicator settings you would have made a handsome profit on this trade.  In fact, you would have even made MORE, then this custom configuration.  Why?  Because the 3rd and final target would have been closer and there would have been no need to go with the May call option.  The April call would have had sufficient time and the cost of the option would have been lower.  N’importa!  There are a lot of ways to make profitable trades with the SST.

With a basket of 10 to 12 good trading stock/ETF names using a 195 minute chart, you could be fairly active trading a very powerful, high percentage winning strategy with a very minimal time effort.  The options are very easy to learn.  We’ve found that the simplest strategies that focus on the buying and selling of straight calls and puts offer a very robust and effective trade method.  I’m sure sophisticated options traders can come up with other strategies with the creative use of various spreads, but it isn’t necessary.  This simple call option delivered a 37% return in just 5 days and took about 37 seconds to figure out and place the trade.  With a slow moving chart, it is very easy to move the dynamic stop as the trade progresses.  See the example below. 

It’s hard to short a market that has been in such an strong uptrend.   But when you’re trading the SST, we want to be able to go short also.  Good money can be made on strategic short positions, even in an uptrend.  There are shorts settng up in the QQQ right now.  In fact, a longer term chart that I like to trade the QQQ with has been short for a few weeks now.  The 195 minute chart has just set one up as well.

Here is a short set-up that you can follow along with.  This is a market that trades very well and is in my personal trading basket.  DNDN, Dendreon Corp.  There is a reversal short with an entry at 37.75.  Notice how there is also a swing low at 37.52.  I’m going to make a small adjustment and get short at 37.48.  Rather than short the stock outright, I’m going to purchase straight May 38 or 39 puts.  I think the 39 puts, although a tiny bit more expensive, will be the better choice but either one will do well if the price moves towards its target levels.  I’ll be exiting one position at 35.58 and a 2nd position at 34.95.  I’ll trail a 3rd position with one of the SST techniques.  I will move my stop according to the chart indicators and will be willing to stop out of all three positions if necessary.

Possible Short Trade; DNDN

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