Mad Dreams of a Silver Million
Happy New Year to All!
Looking forward to a sparkling end to the millenium!
Now, just for fun, I would like to consider what would happen were we to get a multi-year, "millionaire making" bull run in silver & the other PMs. I know that it's 99.9% fantasy, but allow me to indulge.....it's that last 0.1% that makes things fun....
Silver options appear to offer by far the most leverage, so I used them for the following calculations of madness ( 5,000 ounces per contract ) :
Level 1: Jan. 1999
*POS= $5
*Buy 1 Dec 99 $6.25 call for $850 ( 17c )
*Cost of 1yr $1.25 OTM call is 17c/oz
Level 2: Sometime before Nov 99, POS rockets
*POS = $8.25
*Sell call for $2 x 5000 = $10,000
*Will assume due to volatility that cost of 1yr $1.25 OTM call has doubled to 34c ( this is an idiot guess, pls provide more realistic estimate! )
*Buy 5 $9.50 Dec 00 calls @34c, .34 x 5000 x 5 = $8,500
Level 3: Sometime before Nov 00, POS rockets again
*POS = $11.50
*Sell call for $2 x 5000 x 5 = $50,000
*Buy 25 $11.75 Dec 01 calls @34c, .34 x 5000 x 25 = $42,500
Level 4: Sometime before Nov 01, POS rockets again
*POS = $11.50
*Sell call for $2 x 5000 x 5 = $50,000
*Buy 25 $11.75 Dec 01 calls @34c, .34 x 5000 x 25 = $42,500
Level 5: Sometime before Nov 02, POS rockets again
*POS = $13.75
*Sell call for $2 x 5000 x 25 = $250,000
*Buy 100 $15.00 Dec 03 calls @34c, .34 x 5000 x 25 = $170,000
Level 6: Sometime before Nov 03, POS rockets again
*POS = $17.00
*Sell 100 calls for $2 x 5000 x 100 = $1,000,000
Once again, I am new to options and there may be many problems ( besides the risk, which should be obvious to all ) in the above options "gambling/pyramiding" strategy. I am hoping that others with more experience could point out how the actual prices of silver options would change should the POS move significantly.
Looking forward to comments.....
Good luck to all,
THC |
