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SLV – Never Again
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SLV – Never Again

by The MoleMarch 11, 2009

UPDATE 12:16pm EST: Okay, this ETF is dead to me. Observe:

I was holding July puts, and although we dropped quite a bit yesterday my puts gained exactly zero, ziltch, nada, niente, gar nichts, nothing. Today we bounced back a little less than we gained but my puts lost 40% of their value. Now, some of it was admittedly due to a falling VIX, but this still excessive as we didn’t drop 10% in the VIX. On top of this the bid/ask spreads are almost immutable on SLV, so if you are trading OTM options you are getting a haircut selling them. I tried for three days – today I finally gave up and took the bid.

Thus, Evil Speculator is putting SLV on ‘notice’ – Stephen Colbert style. I will not trade options on this piece of crap ever again and will stick to GLD, which I’m not extremely fond of either, but it’s a lot better than this turd. I guess trading the SLV ETF directly is fine, but that’s not my cup of tea.

The option market is still tough for us traders and remains dysfunctional as long as Mr. VIX remains above 40. Perhaps once we push into Primary {2} we’ll see a drop below 35 or even 30, which is when options become a viable alternative again. In the meantime I remain extremely picky when it comes to choosing my options – I have a stable of about 30 instruments which do have sufficient volume (2 Million/day +) and thus offer acceptable bid/ask spreads.

Unfortunately this is keeping me out of a lot of option trades recently (e.g. FXY), which is why I increasingly am looking at trading futures, which are a heaven sent, frankly. I am particularly growing fond of the ZB contract, which according to my back testing, would have produced steady and consistent returns over the last year. If any of you guys are familar with trading the ZB or ZN contract, please feel free to share your experiences.

Finally, please note the new poll on the right side. I expected a bit more participation as I have exciting plans in the works. You guys kept asking for this, so I’m a bit surprised to see such a lousy poll count.


About The Author
The Mole
Mole created Evil Speculator amidst the chaos of the financial crisis in early August of 2008. His vision for Evil Speculator is a refuge of reason, hands-on trading knowledge, and inspiration for traders of all ages and stripes. You can follow him and his nefarious schemes at various social media waterholes below.
  • HungryNewt

    Mole, I'm not sure how to vote since I'm not certain what “email based directed futures trading service” would entail. If you could elaborate that would be great.

  • http://centrifugaldeforest.blogspot.com/ Centrifugal_Deforest

    Medical groups are getting woodsheded today, fyi.
    Shortng w both hands where they are not yet too extended on the day
    Cramer fav's ABT and BAX are not very happy

  • jose1191

    By “directed futures trading service” do you include the ES?

  • StainlessSteelChicken

    No kidding. I've quit trading options for the most part and am sticking to the leveraged ETFs. I got tired of being “right” but not making any money. It reminds me of playing Super Tecmo Bowl when I was a kid — every so often, the computer would just randomly decide that you couldn't tackle its guy, even though you were *clearly* tacking him. That earned my Nintendo a good bashing on more than one occasion. Fuck that, I don't play with cheaters.

    Of course, this almost guarantees I will be buying options on something before EOD.

  • Squidman

    I voted, and am actually watching the videos Vardoger posted about now–Thanks much for that Vardoger. I am really looking forward to the ES trading and whatever your service will be. And thanks for the confirmation on SLV–I watched also as absolutely nothing happened on my July puts in any direction, WTF.

  • Gumbo YaYa

    Mole, my SLV puts are same expiration & have been well balanced…gained nicely yesterday & pullback a little today, but nothing out of the ordinary. I have July 14 & 15 ITM puts…you must have some aggressive OTM puts??

  • BalaB

    For you…..
    Hysterical movie

    http://www.youtube.com/watch?v=Ct2yKmhRsiU

  • molecool

    Yeah, I was a bit more OTM. Still though – the bid/ask spreads on the ITM are not exactly juicy either. I think the main problem is that this ETF does not have enough volume.

  • molecool

    ES, NQ, ZB, maybe the FDAX.

  • GDII

    come on mole, u picky eater.
    i trade slv options for a while. following yr chart, i bot front month puts and exit y'day. i think slv front month options are workable.

  • davos

    Same here, did i miss something ?

  • BalaB

    Here you go Mole, Put Em On NOTICE! Colbert Style

    http://www.shipbrook.com/onnotice/

  • EdblDD

    Sorry Mole for not voting but my account that I use for trading is not large enough to trade the ES. I am retired and use less than 3 percent for trading. So I'm stuck with options..

  • Dragonsbane

    Hey Mole,

    Stay out of the FX options too… they're a dog's breakfast.

  • Goldmund

    Repost from SoH, because I think this may be helpful to many.

    http://i6.photobucket.com/albums/y246/slavkomae

    The concept is very simple: the black line is XLF. The red line is the level of XLF that corresponds to SKF = 150 on that particular day.

    Fascinating, isn't it? Let's ponder upon this for a little while:

    1) In October, XLF = 14 corresponded to SKF=150. Now that level is under 8;
    2) The rate of decay is generally faster the farther XLF falls below the line, and slower the more it rises above it (another reason why the put plays many of us have recently executed are close to being no-brainers, and also why getting SKF calls when SKF is very low makes sense if you believe that the financials will tank soon; the rate of decay is pretty small at those levels);
    3) The overall slope of the curve is fairly constant. Extrapolating, 6 months from now, this line should be around XLF = 4. In September, we may have XLF at 5 and SKF at 75! A year from now, this line may be around XLF = 2… The only way SKF's decay will slow is if XLF stays far above this line for a long time. Either way, the crystal ball says SKF will be in the dumps in the relatively near future, which isn't to say that I won't take another ride or two with calls;
    4) The only bumps — negative decay — come during very short periods near major SKF tops, when XLF has huge rallies and SKF doesn't fall as much “as it should”;
    5) SKF clearly has an expiration date when it'll be a 2-dollar zombie like UYG, even if the environment favorable to it continues.

  • Cattlefitter

    As Ted Butler always complains about, SLV has alot of naked stock short & options . I would love a ZB trading chat room!!

  • BigHouse(Aka Mr Vix)

    You should try trading Vix options lol

  • MaxPainMan

    I never BUY options. I only short puts/calls to take advantage of declining IV (which happens MOST of the time)

  • http://centrifugaldeforest.blogspot.com/ Centrifugal_Deforest

    Med is Dead (Kisses from Cramer)
    (new blog entry here)
    http://centrifugaldeforest.blogspot.com/

  • Fishrman

    Here is a follow up on one of Erik's posts. I noticed he pointed out a topping pattern in XLF. I went back and it has worked almost every time! Nice catch Erik! XLF gaps above resistance with one candle than drops lower. Chart here.

    http://www.screencast.com/users/fishrman/folder

  • rhae

    I do not trade futures, tho I am very keen on them… especially Uncle Bucky USD… I went 2X short Monday with Rydex
    when daily hurst cycles said gettting very extended and toppy… for an intermediate term trade

    I think futures emails would be of help for traders without a good plan… For me not really, cuz it would not change my trading plan.

  • best4now

    Molecool,

    I am a noob trolling for sometime…just wanted to thank you for all your great suggestions and hard work. Sorry about your SLV puts, I took a small position on SLV long here as it disappointments and fills gap, I suspect, and maybe a small reversal double bottom here appears to be developing support. Target $13 or better…

  • http://www.investingwithoptions.com/ steveplace

    I'd think that you sell options due to pos theta, not neg vega. Unless you can trade vol well, which is a pretty advanced trade.

  • molecool

    Guess it's the futures for me then.

  • molecool

    Guys, just use your imagination. I'm disclosing details in due time.

  • Vardoger

    covering half my shorts at spx ~708. economic data for tomorrow:

    Mar 12 08:30 Initial Claims
    Mar 12 08:30 Retail Sales
    Mar 12 08:30 Retail Sales ex-auto
    Mar 12 10:00 Business Inventories

  • molecool

    Seriously, you really think I don't know how it works? I'm not going to jump out/in of puts on every wiggle – this was supposed to be a long term trade for me, but watching the pricing model as we dropped (I got in on the top) I was less than impressed. What I posted has nothing to do with the greeks – I even mentioned that on the chart and in my post.

  • Lordted

    Dunno why you trade options to be honest… Futures are a simple bet. No decay only consideration don't take long term trades too near expiry..

    options too complicated for me.

  • BOOTS

    Starting the 5th wave off the bottom? 667

  • Erikd

    Always Fishing…..nice depth finder… you are finding the honey holes to the system. patterns in fishing and patterns in TA……

  • de3600

    I found the offical flag of evil http://www.screencast.com/users/reggiebar/folde

  • Anonymous
  • MyLifeMyTrade

    Attempt to go positive fails for SPX and DOW – long due visit to 700 coming to realization now

  • http://tradingsigns.blogspot.com/ T. Waffle

    Mole,

    I will pay for n email based directed futures trading service?

  • prozor7

    thx for posting that chart, erikd is always 2 days in front of the market, today I catch that candle and it's gl(r)owing :)

  • Erikd

    this is the chart i put up yesterday that i was told that TA does not work on… i put it out there today for you to see in the coming days/weeks… FAZ http://screencast.com/t/Vy41ydUU

  • http://www.investingwithoptions.com/ steveplace

    Relax, wasn't patronizing you. Was pointing out that being a net seller of options is tricky unless you play vol well… just a discussion w/ maxpainman about greeks related to trading strategies.

    I do disagree with the relation with the VIX and options on SLV/GLD/commodities/currencies. Since the VIX is a stat calc of SPX options which is related to equities, SLV may not follow the same sort of market “volatility.” I guess the closest measure for overall commodity vol is OVX, but that's a longshot. I'd rather evaluate each non-equity ETF and its respective options IV.

    But you're absolutely right, futures are just plain simpler. And there more liquid and have tax advantages versus stock/options.

  • michealr

    Mole, could your SPX (a) wave go to 731 and now (b) at 720? If so, maybe 750-760 4(c).

  • http://sovereignspeculator.com SovSpec

    I've had those same puts for a few weeks now and have been similarly disappointed. Fortunately, I also am short a few contracts of SI, the full-size futures. This is a good product — tight spreads and long hours.

  • http://tradingsigns.blogspot.com/ T. Waffle

    Nice chart. I was told many times that TA never works by people who sings Fundamental song. I stop talking to them and now my YTD return answered their all question.

  • El gAto

    A major part of the bullish thesis is the health of emerging markets (FXI and EEM); they hold the key to this market. Brazil has held it's own and China has stabilized. Moves over the 50DMA will confirm the bullish thesis.

  • http://tradingsigns.blogspot.com/ T. Waffle
  • MyLifeMyTrade

    Financials are the tell again… the pattern in XLF that never fails is at works again. The only thing different this time was that we retraced 61% from the bottom instead of the usual 50%… We should take out 5.9 on XLF in next few days and make successive new lows next week. My gut tells me that Mar Opex is the bottom – I am sure the govt would also liek us to visit 600 or sub-600 and get it done with… They will probably come out with some annoucement like short selling ban/uptick rule or some such crap to coincide with breakdown of 600 to put in a bottom

  • ColonelKurtz

    Hey ZigZag,
    what system are you using on the hourly SPX chart which shows the projected target?

    Thanks

  • MyLifeMyTrade

    11:30 should show us where we head next few days… I have a feeling that bulls are gonna run for cover in next 90 minutes… We went straight up 60 points… it will be a fun ride down.

  • Squidman

    I'm still trying to get my head around this. Would that be the same relationship for all inverses?

  • Vardoger

    volatility can lick my ass. i slayed it with those erx and tna in the money calls. watch HBC tomorrow to see where they price the offering tonight. I'm short and we are now through the trendline on /es. I think this is b and will follow through into the open before reversing hard tomorrow fwiw.

  • Fishrman

    Thanks. It's a lot easier to see the patterns when you are learning from the best. Sticking with the plan and added to FAZ in low 50s. I see why you need a system. Helps drown out the emotion if things go a bit against you.

  • MikeT

    Or….we never had a b and this is the start of wave 5?

  • MaxPainMan

    so where's the bottom of {b} on the SPX?
    710?

  • Keirsten

    Nice chart Erik, that will be fun to follow along going forward. I chart the 3Xs on the dailies for potential price targets, but I still use SPY/XLF/IWM to place my trades on those inverse funds. Just not sure the history is solid enough for my conservative ways just yet. Some of the 2X charts, like SRS for instance got creamed back in Dec. when they paid the dividend.

  • http://zstock7.com/ zstock

    Hi Mylife
    NDAQ, I'm looking for an 11% pullback–It will be sweet if NDAQ finishes the day with a red doji star–for confirmation.

  • Count_de_Monee

    Good to see you've come around to futures. As long as their liquid you should get a much better spread.

  • jose1191

    Don't as yet have a Futures trading account. I currently use E-Trade. Any recommendations for a good futures broker? Many on th is site seem to use TOS. Thanks

  • http://zstock7.com/ zstock

    I have overnight short sell signals on IYF, might pullback to 26–I'm using HOD stop loss though–it's still too tough to call.

  • http://gemstowear.etsy.com Jan

    thanks for the chart eric….i'm a bit caught in FAZ right now. i can't seem to stay away from the danger.

  • http://gemstowear.etsy.com Jan

    wow, TBT is nose diving. was their a 30 yer auction today?

  • TomOfTheNorth

    10 yr today, 30 yr tomorrow

  • Dragonsbane

    The only thing I don't like about JPY futures is that they're quoted as the inverse of the way the rest of the world quotes it. Everyone quotes USD/JPY and they quote JPY/USD to 6 decimal places… Makes no sense to me. Not sure how that would impact the charts though (with the exception of everything being upside dow). I would assume the rounding errors might have some impact.

  • DrMalaka

    Nick's back!

  • moneyfarm

    FXY making a nice move up today, my March 102 calls are happy. I don't think I will ever trade this again though as Mole has been mentioning the B/A and volume are horrid.

  • MaxPainMan

    TOS is awesome.
    Have used ETrade, but not for futures trading (actually, I think ETrade is cheaper)

  • Erikd

    nothing but great odds from my view… you will be rewarded…

  • Lordted

    Piece on Low or high volume bottoms if anyone is interested. http://quantifiableedges.blogspot.com/

    One common misconception about steep selloffs is that they need to be accompanied by high volume in order to mark a bottom. October 10th and (to a lesser degree) November 20th, 2008 are two examples of big down days that came on big volume that soon led to a reversal. While this pattern can precede a bounce, you’d much rather see your new low accompanied by very low volume than very high volume.

    Also talks about bullish or not…

  • Erikd

    as time goes the riddle will be solved. are you ready for OPEX next week?

  • molecool

    Didn't mean to jump on you – just wanted to make sure that my point came across. Appreciate the clarification.

  • Lordted

    IB.. Best spreads and good system

  • moneyfarm

    Short ideas:
    NTAP – retracing on low volume, stoch about to roll over; would look to short around days high at 14.70
    WOOF – I missed ideal entry at 19 this morning; Retraced on low volume and rejected at broken uptrend around 19

  • molecool

    I've been watching the TLT and it's just a complete mess lately. I think this is a 4th wave consolidation – 2 was pretty clean, so 4 becomes a pain. Rules of alternation.

  • Yux

    Tommorrow
    http://www.treas.gov/offices/domestic-finance/d
    Odd – I was going to comment on how it was holding up.

  • http://www.ryanbarr.com Covered (kzhat)

    I'm out of /ES shorts for a nice scalp. Not sure what is going to happen here. We look pretty bearish, but are bumping up against my pivot at 718. Volume is a little off, and EOD could go hard either way.

    Overall today wasn't great for me as I went short overnight and got greedy with my exits causing a locked in 8 point gain to disapear into a 6 point loss, all while my eyeballs were looking at my eyelids :)

    Anyhow, I may get back in around the 724 level, but I think we are going to bust above 718 quickly hear and it will act as support.

  • molecool

    TOS or Mirus.

  • Keirsten

    rubbing greedy hands together. :-)

  • J-So

    XLF in descending triangle. Trying to breakout to the upside. If it breaks $7.21 to the downside watchout. Not much support to the bottom.

  • BalaB

    'meh…..besides a small amount of Puts….I'm out…..

    go get 'em….

  • Vendrell

    There is an alternate EWT count that suggests wave 5 may have already started. Check out Scenario 2.

    http://ew-indextrader.blogspot.com/2009/03/wave

  • http://www.investingwithoptions.com/ steveplace

    No problem. You should come to my live video happy hour tonight on ustream.

  • http://snpmonster.blogspot.com/ SnPMonster

    Yesterday we were very bullish today bearish….lol. Sucks

  • Erikd

    no doubt..

  • MyLifeMyTrade

    I think this is another opp to load up on financial shorts…

  • BigHouse(Aka Mr Vix)

    Will the riddle will be “Don't fall in love with the upside'?.

  • BigHouse(Aka Mr Vix)

    Will you be drinking a beer again? :)

  • TomOfTheNorth

    fell off the wagon….lol

  • KevieKev1

    i agree

  • MyLifeMyTrade

    Erik my friend, when will this sucker XLF die… It looked down for the count and then some stupid news and it springs back up…

  • Pone

    xlf – working on 7.40 for 4th time

  • MyLifeMyTrade

    i added some more Mar SKF calls

  • http://snpmonster.blogspot.com/ SnPMonster

    XLF supposed to be dead….pretty obvious the government won't let it fail.

  • http://www.TheFinancialNinja.com TheFinancialNinja

    Mole,

    I trade ZB, ZN and ZF… traded Eurodollar as well (GE) before LIBOR killed that game.
    I'm big on ES, NQ and FDAX (Dax) and FESX (Eurostoxx).

    Email me anytime and I'll swap you my ninja trading tricks for some of your evil schemes.

  • MyLifeMyTrade

    Die M**** Fu**** die… XLF … bastid… die

  • http://sovereignspeculator.com SovSpec

    I'll admit to doing what Erick is shows here with FAZ, but the idea is that you should really look at a chart of the index or unlevered long ETF instead of the inverse and/or levered versions, since the latter are synthetic and just derivatives of the former and their patterns are determined by the math of swaps agreements and not purely by psychology.

  • http://tradingsigns.blogspot.com/ T. Waffle

    hahahahahhahahhaha

    +1

  • ColonelKurtz

    Possible inverse H&S on the ES 1 min chart. Not pretty is it is one.

  • Trader Jose

    $USD has meaningfully broken below the lower boundary of a wedge that has been forming since December. In addition, it failed in testing $ 26.50 resistance. Can be seen best with a 5 or 15 minute view. Can't get jing to work or would show picture.

    IMHO it is on its way to $ 25.75ish. If so this will drive equities considerably higher.

    Dollar down, market up.

  • de3600

    looks like skf gonna tank

  • Pone

    Anybody- does this current move keep the Bull alive for another day?

  • Stretch

    Short XLF March $7

  • AKJ

    Potential double top on JPM 15 min…

  • BigHouse(Aka Mr Vix)

    XLF going to $10 by Friday lol

  • Ed

    So, I flipped to long since earlier this week (one day too soon, but close enough). Who is holding overnight. I'd like to see SPY go to 74.0 or close before going the other way. But if it doesn't who thinks it's safe to continue holding overnight vs taking profits now ?

  • Stretch

    I hope you are joking. This must be a rally based on mark-to-market hope?

  • MaxPainMan

    uhh… SKF has ALREADY tanked

  • BigHouse(Aka Mr Vix)

    Relax, i'm short XLF

  • MaxPainMan

    well that was a crappy {b}………
    we better tank RIGHT NOW or {c} will be much higher than 740-750……..

  • http://tradingsigns.blogspot.com/ T. Waffle

    you misplaced the zero.

  • molecool

    NUOVO POSTINO!

  • http://www.triathlontrading.com TriathlonTrader

    IMO, this is the top. Not likely to see this level for a while.

  • Basilfawlty

    XLF volume today is almost 2X normal daily volume already.
    XLF is also up.
    In my opinion in the short term, the trend of XLF, and the general market, in my humble opinion is UP.

    Cheers

  • molecool

    admin at evilspeculator – eager to hear about your evil deeds.

  • BigHouse(Aka Mr Vix)

    It looks like spx is tracing out a five wave advance from last Fridays lows.Meaning we are in wave 4 now. If we make new highs today or tomorrow.. …Then i can count a 5 wave advance on a 30min chart. This might mean a bottom is in place. I'm i wrong?

  • peterey

    Erikd,

    I am following like a hawk the 1 month 1 day XLF chart and am not sure the daily candle can close above the weekly blue dotted horizontal line.

    Could you please give your take on today's action and what would happen with a close above that weekly trendline?

    Thanks.

  • Dragonsbane

    Hey Mole,

    Any reason you'd use futures over a specialized FX shop?

  • Erikd

    posted this chart earlier: XLF top being put in, monthly/weekly resistance keeping the trend intact…
    XLF http://screencast.com/t/ntJPOd7xp5Q

  • Erikd

    XLF finished .06 below the weekly close level…. that was not coincidence… 8>)
    rest peacefully tonight

  • Squidman

    Looks like we closed above your FAZ line again. Thanks for the TA confirmation. When I looked at the underlying on SRS, which is IYR, I came to the same TA conclusions anyway, just in reverse. So I don't see what the difference is. Very glad I'm back on the train: loaded up on FAZ calls EOD.

  • Goldmund

    All ultras bleed; bears more than bulls, triples more than doubles.

  • PCap

    VIX is the volatility on the index, and does not necessarily correlate to volatility on other underlying assets.

  • GoingForBroke

    Test link, chart for long/short entries 11th March.
    link

  • GoingForBroke

    Test link, chart for long/short entries 11th March.
    link