Silver Wheaton

Silver Wheaton will remain vulnerable unless it pops above 40.39 over the next couple of days.  Otherwise, a corrective pattern projecting to as low as 33.90 should be regarded a worst-case possibility for the near term. The downtrend has not yet gotten close to the 36.50 midpoint linked to that target, but if and when it does, it will make an opportune spot to try bottom-fishing with a tight stop-loss.  For now, we'll let our position ride:  long 800 shares with a cost basis of 14.27 against eight January 34 puts we acquired for 0.77

I sought  feedback in the chat room yesterday from traders who may have used my 42.34 target to put on a hedge at the very top, but there was none (although one person evidently noticed that the target came within three pennies of nailing the actual high).  The top occurred on an opening-bar spike of 1.50, so it may endure for yet a few more days if not longer.  Meanwhile, we'll carry the Jan 34 puts for 0.77, which is about halfway between the criminally-rigged opening price and the intraday low.  For now, use a 67-cent stop-loss for the puts. Our goal, if SLW eases further, will be to leg into a sell-side something-or-other put that will give us some premium income.

We hold 800 shares with a cost basis of 14.27, yielding a theoretical gain of about $21,264 with the stock trading around 40.85.   Because SLW is closing rapidly on the 42.37 target given here a while back, let's try to put on a hedge when it gets there by buying eight January 34 puts.  I've included a table with "fair" option values to help guide you, since you should try to buy a few puts when 41.65 is reached. (That's an alternative target where SLW could conceivably top.)  If the stock ultimately hits 42.37, a price of 0.44 (per the tabular data) would be doing pretty good for the Jan 34 puts.  _______ UPDATE (12:24 p.m. ET):  The 42.37 target came within three cents of nailing the high of a wicked, opening-bar gap, but the put options were criminally mispriced at the time.  The stock has since collapsed $2.80 from this morning's 42.34 high, so partial profit-taking is in order on any hedge initiated at the top.  Please let me know in the chat room whether, and how, you used the target.

SLW is headed higher, potentially on a rampage in December to 41.65/42.37, but because a lesser Hidden Pivot resistance at 37.41 could temporarily chill the rally, we'll leave our defensive call spread untouched. To put it out of mind as well, let's adjust the cost basis of the 800 shares of stock we own upward to 14.27, giving us a paper profit of $18,000 on the position. We needn't worry about exiting the spread either, since exercise and assignment will cancel each other out if SLW is trading above 30 at expiration.  We should also plan to short eight December 30 puts if the stock falls after touching 37.41, since that would add nothing to our risk above 25. Let's be ready now with a g-t-c offer:  eight Dec 30 puts  @ 0.27. (They closed yesterday @ 0.11.) _______ UPDATE (December 6):  The stock has continued relentlessly higher without pulling back, so we never had an opportunity to short the puts. A small matter, though, since, at a current price of 40.56, the theoretical gain on our position is about $21,000.

We hold a long-term position of 800 shares with an adjusted cost basis of 13.07 against eight December 30-35 call spreads shorted for 3.80 at the recent high.  Let's try to turn the call spread into a butterfly by buying the December 25-30 call spread eight times for 3.60 or better, good till canceled. (It closed yesterday for around 4.00.)  We can't get hurt to the upside since our short spread is akin to a covered write, so we'll take our sweet old time waiting for the long spread to come to us at our price if we have to. _______ UPDATE (Nov 16, 12:16 p.m. ET): Cancel the bid for the call spread, since the spread we've got on should be protection enough.

We hold a long-term position of 800 shares with an adjusted cost basis of 13.07 and a theoretical profit of $17,600.  One can never be certain exactly where a parabolic rally will crest, but let's use a Hidden Pivot resistance at 37.16 as a possible target.  This will give us the wherewithal to try to leg into a December 25-30-35 call butterfly spread that would give us cheap protection against a relapse.  To implement this plan, we'll start by shorting the December 30-35 call spread eight times if and when SLW gets within 10 cents of the target. My rough estimate of how much the spread will be selling for is 3.85, so if you can get that much or more for it, you'll be doing great; if five cents less, still not too bad.  If we are able to sell the spread, we'll be looking to buy the December 25-30 call spread on weakness.  Our maximum risk on the short spread alone, assuming a sale at 3.85, would be $115 per spread, but that would be more than doubly offset by our corresponding gain on the long stock position. _______ UPDATE (10:12 a.m. EDT): With a spectacular lunge, SLW made a so-far high today at 37.20(!), pushing the December 30-35 call spread to a maximum price of 4.00.  We'll use 3.90 as our cost basis for the eight spreads we shorted, and for the time being do nothing further.  If we leave things as they are, the spread gives us 100% protection down to about $33. _______ FURTHER UPDATE: I see that someone in the chat room has reported a 3.80 fill on the spread -- 20 cents lower than the highest do-able price -- so that's the number we'll use for our cost basis.  The defensive short sale is not looking

We hold a long-term position of 800 shares with an adjusted cost basis of 13.07.  I'd raised the prospect earlier of doing some covered writes if and when a Hidden Pivot target above $28 is reached, but we'll put that plan on hold for now, since, like Silver itself, the stock looks to be consolidating for a shot at something bigger. ______  UPDATE (Sunday night, November 7):  SLW has shown such pluck blowing past a clear Hidden Pivot resistance at 32.95 (60m, A=26.07, B=30.27) that we'll let our profits -- currenly $16,000 on paper -- run some more before we try covered-writing the stock.

We hold 800 shares with an adjusted cost basis of 13.07.  There are two Hidden Pivot targets just above -- at 28.61, 22 cents beyond yesterday's high; and at 29.00.  As a hedge, I'll recommend buying four November 29 puts for around 1.05 if SLW gets within a nickel of the higher pivot. I may update guidance, so check back intraday.

Against 800 shares of stock we hold with a 12.95 basis, we bought four November 27 puts for 1.72 as a hedge when the SLW was topping recently.  The puts are still above water, but I'll suggest exiting them if they trade 1.62 or lower.  Meanwhile, although I identified a minor correction target at 25.16 in the chat room earlier today, the rally is within easy distance of negating it with a print above 27.00, the point 'C' of the bearish pattern. _______ UPDATE (10:16 a.m. EDT): SLW opened on a gap -- it does so most of the time -- stopping us out of the four puts at 1.48.  Imputing the 24-cent loss per contract to the cost of our stock will raise our basis by 12 cents, to 13.07.  The puts did their job and cost us little, partially insuring us against the more severe pullback that was possible from the last Hidden Pivot top.