Thursday, April 7, 2011

OMG - There's Silver in Them Thar Hills

Tons of informative videos on YouTube talk about the pitfalls of investing in leveraged bull or bear ETF's: the videos range from clearly just poorly informed sales people, to well-informed but injured investors talking about the fleecing of Main Street by the denizens of Wall Street.  But how else are you going to quickly learn about the risks and rewards of leveraged and/or inverse ETFs than by listening to many sources (including this wonderful Seeking Alpha article)?

A wee bit ago, MM posted part of a conversation he and I had, in which I essentially glorified ZSL. I was a newbie and very enamoured of the possibilities of silver hitting a peak... which it then did not do.  Silver in fact just kept rising, and is rising today.  So, you like an inverse ETF, and you want to stay on top of it, but you don't want to lose money on it, so what do you do?  Easy:  check to see if Put options are listed for it, and jump in for the ride down (up now, as you're effectively shorting the falling inverse ETF).  Make sense?

Granted, options have a decaying time value, but if you buy far enough out of the money (so, no intrinsic value to speak of), and the underlying catches up with your position (or, down to your position) then you could be sitting pretty on a nice little gain.  Be careful to always seek the LEAPS or furthest out option expiration dates, because you don't want to get so caught up in family and work-a-day stuff that you forget the expiration date has come and gone.  With ZSL, I'm looking at the $15 Jan 11, 2011 Puts, thinking that as ZSL has very easily fallen from 27 to 20, 15 cannot be that far out.

What do you think?



  1. I really appreciate your post and you explain each and every point very well.Thanks for sharing this information.And I’ll love to read your next post too.
    options trading

  2. "But to double the return from climb in silver I recommend getting short exposure to ZSL (ProShares UltraShort Silver)." did this guy read my post???


  3. Thanks for the kind comments!