SLW

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

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

Signs look favorable for a thrust that could eventually push Silver Wheaton above its all-time high at 47.60. There are two bullish things to note in the accompanying chart. For one, last week's chop looks like a consolidation above the big pattern's 39.17 midpoint. And for two, before the consolidation began, the stock poked above the look-to-the-left peak at 39.95, refreshing the bullishness of the intraday charts. With a rally target as high as 48.54 in prospect over the next couple of months, a very low-risk way to leverage the move would entail legging into a butterfly spread targeted on the 48 strike. I will provide further details during market hours as a specific plan comes into focus. (If you'd like to be on board for this one but don't subscribe, click here for a free trial that will give you all the benefits of Rick's Picks, including access to a 24/7 chat room that draws savvy traders from around the world.)

The stock is sitting at a precipice, since yesterday's close was on a major trendline (see inset). The support is so obvious that we should be alert to a possible false breakdown that could afford us a bottom-fishing opportunity.  The nearest Hidden Pivot support lies at 31.91 (A=37.72 on May 10, daily chart), so that's where it should be attempted.  Camouflaged entry is preferred, but if you don't want to bother, or if you don't know how, bid 31.93, stop 31.86, for 400 shares. Please note that if Wheaton should really fall apart it could fall all the way to 26.77, the 'D' target of a pattern shown in the chart.  We continue to hold 300 shares @ 42.01 against three June 40 puts with a 4.00 basis, but option expiration will soon put it out of its misery.

We hold 300 shares @ 42.01 against three June 40 puts with a 4.00 basis. The stock will have to push above the 37.72 peak recorded on May 10 to revitalize bulls, but failing that, it seems likely to succumb to the gravitational pull of a trendline that comes in today at around 33.48. Our short offer of June 40 calls  for 3.10 -- a riskless sale, since it would give us a "conversion" position --  is a distant longshot at this point, but you should nevertheless bring the offer down to $2 and let it stand.

With just a little more oomph, Silver Wheaton will create its first bullish impulse leg  in more than six weeks on the daily chart. To be more precise, it will take a stab above a 37.72 peak recorded May 10 on the way down to do the trick.  That would make for clear sailing to 41.805, and thence open a path to its 'D' sibling at 51.18.  We hold 300 shares @ 42.01 against three June 40 puts with a 4.00 basis.  Continue to offer three June 40 calls short for 3.10. This would lock us into a risk-free "conversion" while recouping a substantial piece of a currently unrealized loss of around $1800.

We hold 300 shares from 42.01 against three June 40 puts with a 4.00 costs basis that reflects a loss booked on May 38 puts that we'd shorted. Continue to offer three June 40 calls short, but for 3.10 now.

We hold 300 shares from 42.01 against three June 40 put-May 38 puts spreads legged on for a 0.50 CREDIT. Legging out of it has proved to be more than a small annoyance, since the stock hasn't quite reached our rally targets although its declines have been on opening-bar gaps. I will nonetheless recommend exiting the May puts today at-will, catch-as-catch-can.  Officially, I'll buy them back at-the-market on the opening. But subtler, more profitable tactics will be possible if you use Hidden Pivot coordinates as follows: On weakness, my minimum downside target would be 33.44, the 'p' midpoint of the Daily-chart pattern A=42.89, B=34.34, and C=37.72.  Slippage beneath the midpoint would therefore imply 29.17, the midpoint's 'D' sibling. However, there is one more possible support where you could look for -- and potentially leverage -- a bounce: at 32.76, where trendline support would come in today on moderate weakness. ______ UPDATE (1:22 p.m. EDT):  May 38 puts could have been covered anywhere between 5.75 and 3.70, so we'll use the 4.50 midpoint as our price. Since we shorted them for 2.85, we'll impute the 1.65 loss to the 2.35 we paid for the three Jun 40 puts that we still hold, bringing them to 4.00.  We are also long 300 shares from 42.01. At current prices, the position loss nets out to around $1600.  The position gives us the ability to short three June 40 calls without risk, since it would give us a "reverse conversion" that nets out to no position at all at June expiration. Accordingly, I'll suggest offering three June 40 calls short for 3.70, good-till-cancelled. They are currently trading for around 0.80, so the stock would have to rally powerfully to get us filled. And, yes, this is much busier than I'd ever intended for a

The distributive, opening-bar feints are growing hell of tiresome, besides making it more difficult to cover the May 38 puts we shorted against June 40 puts we are long. SLW is working on a minor, 38.620 rally target that would become an odds-on bet if its sibling midpoint at 37.510 gets roughed up. Unfortunately, downside risk is $2+ if the stock catches another air pocket.  All things considered, I'll recommend bidding 1.05 to cover the three May puts, day order.