Trade Details & Summary

SLV Short Straddle (LIVE Opening Trade)

Using our watch list software we decided to continue to add to our existing SLV short straddle position with a new set of strike prices reflective of the move lower in the ETF recently.

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In this video, we're going to go hunting for a new short premium trade. Right now markets are a little bit off today as you can see. Most of the things that are moving today are down as we just kind of scroll through our watch list here on the website.

What we want to do is take advantage of maybe the little bit of a move down in the market in the fact that starting to rise, although right now there's not widespread volatility. We still don't have a lot of things that we can choose from.

First thing to do in here is just taking a look at only ETFs. We're right now in the middle of earning season. If we toggle ETFs off and just go to earnings only, you can see there's a lot of companies that are announcing earnings soon as designated by this little purple icon in the right-hand corner of the stock chart symbol. We don't want to mess with any earnings right now.

We just want to get on some regular portfolio trades. I'm going to go ahead and toggle this for ETFs only. We ranked it by highest implied volatility first. We can resort this whole list lowest implied volatility to highest, or we can sort it high to low.

In this case, there are not too many opportunities that come up. If we just filter out only the highest possible implied volatility securities we are left with just two ETFs that have implied volatility over the 50th percentile that we can make a trade on.

In this case today we're going to try to do something in silver, which is SLV. We already actually have a position, and so it'll be a little bit different for us today.

There's a chart here of silver. Silver has recently made a huge move from about 14 up to about 16 1/2. It has recently starting to pull back and maybe consolidate, but again, implied volatility is real, really high given the significant jump in the stock price.

What we want to do is potentially make an additional trade in silver today. We already have the 16 1/2 straddle that we have working in the May contracts, which are 28 days to go until expiration. We want to add something in addition to that.

The May contracts that we have, the straddle that we had in silver that we added here, we are down about $16 on that at the original position, but we added this position just a couple of days ago, back on 4-28. It's now a couple of days later on 4-22. We want to get into a little bit more again.

We've got the capital. We've got the capacity to get into some more positions here in silver. What we're going to do is we're going to spread out our strikes, and we're going to try to go after the 16 straddle as well as the 16 1/2. If you right click on the 16, calls are put to either one.

We're just going to go ahead and open that up. Now you can see our existing position right now is we're short three 16 1/2 calls and three 16 1/2 puts. We're going to try to mimic that by doing three of the new 16 straddle call and put. We're going to try to do the same amount.

We get roughly the same credit about 112 versus 116. It's a couple of days later, so we're getting a little less premium because of the time. If we go ahead and throw this thing up on the analyze tab you can see that this new position gives us a little bit more balance overall.

This is why I like to leg into a couple of positions over time. Instead of entering one big huge position I just toggled off this sample trade that we're going to make here for a second. This is our current position in SLV.

If we had one big huge position, it doesn't give us a lot of flexibility to move with the market. By legging into this trade and adding another set of strangles, or I'm sorry, straddles, later on, it gives us just a little bit more flexibility and a little bit more of a neutral bias.

With this new trade on, if it does fill, you can see the stock is trading here at about 1613, and we've got extended break even points, almost down to 15 and about 17 1/2 as far as our break-even points and expirations.

That's all the way down here to about 15. It's about how far we're giving the stock to fall and still make money. Even if the stock falls all the way to about 15, we could still make a lot of money on this trade to expiration.

A lot of room for a pull back, and I think that's really what I'm concerned about most. Again, with high implied volatility it gives you a lot of room to sell some premium, gives the stock a wide range to move in and still can make a little bit of money.

In this case, we're just going to right click on this trade. We're going to hit confirm and send, that'll bring up our order dialogue box. We're just going to go ahead and try and fill it right about where it's trading right now, which is about 112.

An iron condor alternative to this, if you can't do the slow, and you can see it just filled automatically, that fill went in right away, so we are filled at 112. If you can't do the straddle, one of the things that you could do is go out on even distance on either end and buy protection for very cheap.

You can go out to, let's say, the 13 puts on the down side, which is $3 away. You could then buy the 13 puts, which are about a dollar and a half, and then create an iron butterfly-type position. You would also have to go up to $3 as well above the market to the 19 calls, buy those as well. Those are a little bit more expensive at $8.

For $9-$ten you give yourself an opportunity to get into a trade as a risk define the position. This is good if you have a Roth IRA or an SEP-IRA or traditional IRA that you can't make undefined risk trades like this.

In our case, we have the capacity and the capital to handle this trade, so we're going to go ahead and add that to our portfolio and keep moving forward.

I hope you enjoyed this video. As always, if you have any comments or questions, please ask them in the comment section right below. Until next time, happy trading.

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