SLV – Never Again

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.