Silver Wheaton

Trying to squeeze the last dime of risk from our butterfly spread will cost us, since the eight September 46 calls we were looking to short for 0.79 are now trading for around 0.37.  In any event, I'll recommend that you offer them short today for 0.45 -- two for each pair you hold of Sep 42/Sep 50 calls. If we get our price we'll have four Sep 42/46/50 call butterflies with $400 of profit potential each and a maximum loss of no more than $68 -- still pretty good odds. Our maximum profit would come if the stock recovers into the mid-40s by early to mid-September.  FYI, the nearest Hidden Pivot support where we might expect a strong turn this morning lies at 34.23 -- 31 cents beneath yesterday's bottom.   If I revise the strategy given above, I'll signal in the chat room intraday and also mail out an alert to all who are signed up to receive them.  (You can do so by clicking on "Contact Us" on the home page.) _______ UPDATE (11:23a.m. EDT): The stock gapped up to 36.10 on the opening today, making the September 46 calls an easy short at 0.45, since they were worth more than 0.60 at the high. We now hold four September 42/46/50 call butterfly spreads for a 0.68 debit apiece. Do nothing further for now. The stock looks bound for a Hidden Pivot support at 31.74. (60m, A=40.50 on July 25 at 9 a.m. EDT, B=35.43 on July 25 at 10 a.m.) _______ FURTHER UPDATE (1:22 p.m. EDT):  I'm retracting the short sale of September 46 SLW calls, since I've just heard from a subscriber who had a 0.45 limit order go unfilled. My guess is that the market makers read SLW's head fake perfectly and were unwilling

A feisty Silver Wheaton got nearly all of the attention during this session, since we hold a partial butterfly spread in the stock. One more trade is needed to complete the position, and once we’ve shorted some September 46 calls against what we already hold, we’ll have a virtually riskless bet on SLW’s continuing rise into early autumn. We also looked at the stock as a possible trade in real time, since it was stealing up on an opening-bar peak that obviously had trapped many bulls (and short-covering bears).

We hold four September 42 calls @ 1.32 and four September 50 calls @ 0.26 that will turn into a risk-free bullish butterfly spread if and when we are able to short eight September 46 calls for 0.79 or better.  Continue to offer the calls good-till-canceled, since a short-squeeze opening could cause them to fill at our price or even higher.  FYI, the rally from Friday's low has the potential to hit 41.13 (daily, A=34.54, B=40.24) if the stock closes for two consecutive days above 38.28, a Midpoint Pivot.  For your interest, I've used Larry McMillan's option calculator (see inset) to determine approximately how much the stock would have to sell for in order for the September 46 calls to be trading at our short-offer price of 0.79.  The fact that the calls were selling for around 0.45 yesterday with SLW at 37.45 gives them an implied volatility of 50.8.  If you plug that volatility into the calculator and run the stock at 39.35, it yields a theoretical value of 0.79 for the calls. In practice, however, if the stock takes a few days to climb to 39.35, call volatility would likely diminish, requiring SLW to somewhat exceed 39.35 to get our option order filled.

These are interesting times for Silver Wheaton, for sure. The stock played toe-sies on Friday with a very important trendline that I'd said was in play. My hunch is that it will hammer the support for a bit more this week but eventually come out on top. To remove the forecast from the realm of speculation, however, it will take a thrust to at least 42.90 to turn the daily chart bullish again. That's a tall order, but it hardly strains logic to assume the stock's best days lie ahead, not behind. We shall see, but whatever the case, we'll continue to hold four Sep 42 calls for 1.32 and four Sep 50 calls for 0.26.  Our goal is to complete the butterfly spread by shorting eight Sep 46 calls for 0.79 or more, giving us a risk-free play on a bullish rest-of-the-summer.

Curious about what Hidden Pivot Analysis can do in real time?  Check out the video below, An Impromptu Hunt for Trades. The recording was made Thursday morning as we watched Silver Wheaton, the S&Ps, the Mini-Russell and other popular trading vehicles go through their paces. Although recordings of these online, impromptu trading sessions would ordinarily be made available only to paying subscribers, we've published this one in response to numerous queries we received recently about the upcoming Hidden Pivot Webinar on August 10-11.  Incidentally, there are still a few seats left -- and a $50 discount if you sign up now.

In this impromptu session conducted Thursday morning, we looked for real-time trading opporunities in the E-Mini S&P, the Mini-Russell, Silver Wheaton and some other vehicles. These sessions are open to all Rick's Picks subscribers, although this recording is being made available to the public. Subscribers can be notified when the impromptu sessions are about to begin, and receive trading alerts intraday, by signing up on the "Contact Us" tab at the top of this page. A free trial subscription is also available by clicking on the link near the upper left-hand corner.

With SLW under heavy selling yesterday, we initiated the long side of our butterfly spread, buying four September 42 calls for 1.32 and four September 50 calls for 0.26. Now, we'll look to sell eight September 46 calls short for 0.79, presumably on a day when Silver Wheaton shares are doing better.  A sale at that price would give us four "free" butterflies, and therefore no risk.  For comparison, if we were to short the September 46 calls at their current price of 0.50, the resulting butterfly position could do no worse than lose $58 per spread, or a total of $232 (plus commissions).  The maximum profit, based on a short sale at 0.50, would be $300 per spread -- so we'd be getting 3-to-1 odds against an SLW rally into the mid-40s between now and September 16.  I think we can do better, and that's why we'll hold off shorting the September 50 calls for the time being. Those who monitored the trade will know that things could have turned out far worse if we'd chased the options. The September 42s trade as high as 1.90 yesterday, and although the 1.32 we paid for them was not the best price of the day, it's only 18 cents above the intraday low.  As for the September 50 calls,  even with SLW shares getting shellacked, they fell no more than a nickel below where we'd bought them after trading as high as 0.35.  Regarding the stock, as I noted during yesterday's Hidden Pivot tutorial session, we should brace for more downside to at least $36, where a familiar trendline comes in as potential support.  Although it's hard not to notice the perfect head-and-shoulders formation that SLW has traced out since late 2010, I'd suggested not worrying about it for now, if

Congressional wrangling over the debt limit has made the markets jittery lately, providing us with an excellent opportunity to look for day trades in a more or less trendless flux. We spent time on the intraday charts of the E-Mini S&Ps, then segued to the Dollar Index, which was in the throes of a steep rally. A highlight of the session was a detailed explanation of the bullish butterfly spread in Silver Wheaton that we'd been attempting to leg on as the stock swung wildly from ebullience to despair.

The stock has pulled back after tripping an entry signal for a ride to as high as 42.89 over the near term.  Since we're shooting for the 48.54 target of an even larger pattern, let's try to leg into a virtually riskless butterfly spread on weakness. For starters, in order to wind up with the Sep 42/46/50 'fly, we can bid 1.32 for four September 42 calls.  (They settled yesterday at 1.56. If we aren't even close, I'll simply adjust. There is no hurry to get this spread done.)  If the stock weakens today and we buy the calls at our price, we would then be looking to short-sell eight September 46 calls against them at a later date.  The third and final leg would come with the purchase of four September 50 calls, presumably on weakness in the underlying stock.  For now, though, put in a "stink bid" at 0.26 for four of them. They don't trade very much and are hard to buy, but it can't hurt to be ready if a few come in for sale at a great price.  My goal is to leg into the spread over the next 8-12 days at no cost. (In trader's parlance, that would be "doing the butterfly" for "even.") If successful, this position would give us no possibility of a loss at expiration, no matter where the stock is trading; but the prospect, in theory, of a gain of as much as $400 per spread if SLW is approaching 46 come September. Since every penny counts, I am requesting that you not jump the gun on this order or improvise.  Also, if an unanticipated opportunity should present itself intraday, I'll send out a timely e-mail alert to paid Rick's Picks members who have signed up for them.   (And