SILVER PRESENTS OPTIMAL BUYING CONDITIONS FOR BULLISH TRADES
Thanks for reading the first issue of the MIT Digest! This is a new project and the plans for this FREE Digest will evolve overtime. We will publish a new Masters in Trading Digest issue every Monday, Wednesday, and Friday — sometimes a bit more.
Anytime something really important is going on – something you're not seeing in the mainstream financial media – you can count on hearing from us!
You can also count on us responding to your feedback because the MIT Digest is created and shared to help you find comfort in the financial markets.
In our first issue, we share an Actionable Trade Recommendation in a Silver Miner. We review a phenomenal trade in $TWTR, and share members response in our active Discord channel
You’ll come across Unusual Options Activity education so you learn to follow the ‘smart money’… and will catch you up on the hottest blog posts of the week…
Here we go.
ACTIONABLE TRADE RECOMMENDATION
We’re in one of the best environments you’ll ever see for buying gold… and its underrated cousin, silver. Thanks to rising inflation and the green energy trend, silver is ripe for a big rally… and there’s a simple way to get exposure.
“Generally, when copper outperforms silver, it means expectations are very optimistic for the global economy,” says Decio Nascimento, chief investment officer at global macro hedge fund Norbury Partners.
In the chart below we go back 5 years. Notice how Copper and Gold are both outperforming Silver? We’ve been bullish silver for a bit, and so far the market has not moved in our favor but we believe the market has this one wrong.
The below chart shows the ‘expected range’ of Silver Futures. Just recently Silver Futures have traded to the bottom of it’s range and we expect the price to rally from these beaten down levels.
There are many ways to express a long position in Silver. Traders can look to the Futures market, stock market and/or the options market.
We like trading the silver miner $PAAS.
Traders looking to get involved in a long silver play, may consider $PAAS options in April of 2022. We like April because the analysis above shows a dislocation going back a few years so it’s important the trade has time to work.
Trade Idea – Buying April $27/$33 Vertical Call Spread for $.80 or so. This trade is buying the $27 strike calls, while selling the $33 strike calls. The reason to sell $33 strike calls is only to reduce the cost basis of the entire trade. Traders willing to take on more risk, may decide to just buy the April $27 calls.
- RISK: $.80 ($800/per 10 lot)
- REWARD: $5.2 ($5,200/per 10 lot)
In our Monday Wiretapper Live Options Class, we will review this trade and answer any questions.
DISCORD HIGHLIGHTS
On December 1st, we shared an Insights post, Twitter Shake-up: Actionable Trade Idea.
Trade Idea
Twitter is an excellent long term hold from present trading levels. Traders should consider buying stock. We like to enter long stock positions with a 3 tranche plan. Using today’s price of $42.82, a trader who would like to risk $10,000 may enter these “limit orders”.
- Buy 75 shares $42.82 ($3,211 Risk)
- Limit to Buy 75 Shares at $41.50 ($3,112.50 Risk)
- Limit to Buy 100 Shares at $40.10 ($4,010 Risk)
Total Risk: $10,333
BREAKING DOWN THE BLOG
NASDAQ VS. RUSSELL 2000: WHAT DRIVES THE LARGE-CAP AND SMALL-CAP TECHNOLOGY RELATIONSHIP?
The Russell 2000 index comprises the 2000 smallest companies listed in the Russell 3000 index. Given its focus on smaller companies operating within the US market, the Russell 2000 is often considered a good gauge of the broader American economy.
OPTIONS EDUCATION - LESSON OF THE WEEK
How to Price a Vertical Call Spread
Unusual Options Activity $MKC
Wall Street Wiretapper, our web based Unusual Options Activity Scanner noticed extremely high options volume on $MKC.
The average options volume on $MKC over the last 20 days has been 738 options, but this past Friday’s options volume was 41,829!
When we see activity like this – we pay attention because ‘smart money’ must know something to risk this sizable amount of capital.
Notice the options chain above? $MKC, Jan 22 Calls on the 100 strike traded 29,250x! That’s a really big order. IF those options traded for $.90, the entire trade=value would be 29,250*.90 = $2.65m of risk. That’s a lot of risk!
This order was executed throughout the trading day on Friday. $MKC opened at $88, and throughout the day slowly traded higher, reaching $90.64.
Because of $MKC’s trading behavior the day of this huge trade, it’s our opinion that these calls were purchased to express a Bullish position in price, along with a bullish volatility position on $MKC.
Let’s watch and see what happens.
FINAL THOUGHTS
WHAT TO EXPECT IN WEDNESDAY’S MIT DIGEST – 002
This Wednesday, we will go over the trading behavior of Silver, $TWTR, and $MKC. It’s important to review the trades we highlight and discuss how they react to risk in the broader market.
For instance, will Silver find strength in a market rally, or is it stronger if the market falls? $MKC – will other traders notice the Unusual Options Activity and drive the stock higher?
Wednesday we plan to highlight a new Coin as well, so make sure you do not miss an issue.
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Masters in Trading Digest - Issue 1
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