Hello,
Absence of any activity on silver thread is symptomatic of this "flippers" market. Lack of substance behind many stories has convinced speculators that they must be quick to "flip out" with any profit - the stories don't hold up and down goes the stock. Old Wall Street adage - never fight the tape. This means one must be content with small profits. But small profits don't compensate for substantial risks so our market has gone toes up because smart investors see an adverse reward/risk ratio. This is typical of a market correction, but not indicative of a near-term upturn.
In this sort of market indecision will produce nothing but losses or missed opportunity (maybe the latter is preferable.) To participate at all one must be ready to buy on the smallest of signs of an upmove, ready to flip out in 2-3 days if the move doesn't materialize and swift to nail down profit once momentum, relative strength, etc. slow.
The fundamental of covered option writing is to sell call option when the underlying equity has just finishing a technical upmove within a long term uptrend. Option premium will have temporarily expanded due to anticipation the equity will move higher. The seller captures the bigger premium with a plan to buy back option when stock's momentum slows and, therefore, premium shrinks, plus some time premium has expired, therefure yielding reduced option premium. This yields 1. better return on capital at risk, 2. better downside breakeven, and, 3. improved reward/risk ratio.
Selling PAA call options on renewed strength in PAA stock is the correct strategy. I would not be surprised to see another major silver rally commence around October, ending Feb. - March. With lots of caveats about the imprecision of commodities price timing, I suggest being patient vis a vis selling PAA call options.
RH |
