Short

Commercials are at it again Low risk/high reward potential

Updated

Commercial producers of silver are rarely wrong, in fact, of the last 19 times their net short position rose to their highest point in 21 periods, 18 times resulted in a pullback for an average of an 11% decline. They are not always right, but going back to 2010, they've called the direction of silver 18 times. This should get you noticing that they have once again accumulated a massive net short position. This time nearly 7% off the most recent highs. Historically this has produced significant moves to the downside, lasting an average of 3.6 weeks (we just completed week 1). The top end risk is the 7.6% I mentioned before, but logically the top end risk is closer to 5% given the high of last weeks candle at 15.56. The target range is at least 11% away at 13.13, but could go much lower given the level of short positions has climbed to +70K, normally 50K is a good selling point. They are massively short at these prices. I'll go with the commercial producers who, I assume, know more about silver than I and take this trade in the option markets. I'll be buying at the money puts expiring in late March on the SLV because I don't trade the FXCM. I expect this trade to last about a month, closing out positions as they double in value and will re-evaluate on any significant changes. I fully expect a move to 13/oz, but will take profits off the table as I have them.
(See notes on chart)
And as always,
Trade responsibly
ShirokiHeishi

Note

Changed my entry ideas and went short the June 13 puts as I believe they were the best bang for the buck, although that doesn't include buying puts on strength as this trade develops.
Good Trading folks, and remember that the market can remain irrational longer than you can stay solvent: Hedge your risks by limiting premium.

Note

EOM March puts doubled in value today...I suspect the move begins

Note

I would like to say that I was dead wrong on this and as the current price action is now moving away from whatever bearishness I saw. Took a small profit in the beginning and now am wondering how high can silver really climb.

ShirokiHeishi

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