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Bob Kirtley spent many years working on Oil projects including some in Alberta, such as the tar sands installations in Fort McMurray. He lived and worked in many different countries, as that is the nature of the construction business. Planning and cost control are key to a projects success and... More
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  • Apple Incorporated Or Silver Wheaton Corporation? Updated 20 Sep 2012

    On Sunday, March 4, 2012 we posted an article comparing two of the markets popular stocks and as a short re-cap we wrote the following:

    Apple Incorporated (AAPL) or Silver Wheaton Corporation (SLW): some would say its a little like David and Goliath or Bambi meets Godzilla. Apple is currently the darling of the technology sector and Silver Wheaton is hugely popular in the precious metals space.

    As investors we need to continually ask the following question:

    Is this the best investment vehicle for my hard earned cash?

    So, we took a look outside of our precious metals box and duly noticed the meteoric rise of Apple. No doubt the supporters of Apple would find it laughable to be compared with a much smaller silver streaming company. If we take a quick look at the performance of both since January 2011 we can see that AAPL is the winner by a long way.

    We also posted this chart of the progress that had been achieved by both companies.

    (click to enlarge)

    If we now fast forward to today we have the following financial data from which we can glean that Apple continues to make terrific progress and that Silver Wheaton has finally started to gain some traction.

    Apple Corp has a market capitalization of $657.97Bln, an EPS of $42.54, a 52 week low of $342.24 and a high of $702.33, average volume of shares traded is between 13.00Mln and 14.00Mln, so the liquidity is very good allowing ease of access and exit when trading, with 937.41 million shares outstanding. Current stock price is $701.91.

    Silver Wheaton Corporation has a market capitalization of $14.00Bln, an EPS of $1.60, a 52 week low of $22.94 and a high of $42.50, average volume of shares traded is between 4.00Mln and 5.00Mln, so the liquidity is good, with 353.87 million shares outstanding. Current stock price is $39.55.

    In terms of market capitalization APPL is 47 times bigger than SLW, also of interest is that its EPS is greater than SLW's stock price.

    Now, when looking to invest in a stock we try to acquire a stock that we believe can double in 12 to 18 months. For Apple to double it will need to become a trillion dollar plus company. This is a big ask, even for a stock market favorite, however, it is heading north with considerable speed. On the other hand, SLW will need to grow its value from $14Bln to $28Bln, which is also a big ask, but who would have thought it would have gotten this far back in the day when it could be acquired for around $4.00.

    These are two totally different companies in different market sectors so its very much like comparing apples with oranges. However, when we look at the price of these stocks as of March 4, 2012 (when we suggested that SLW would outperform AAPL by the year end) and compare them to the prices that we have today, we get the following result;

    AAPL: March 4, 2012, $545.18 - Today $701.91 an increase of 28.7%.

    SLW: March 4, 2012, $37.59 - Today $39.55 an increase of 5.2%.

    Clearly, Apple has outperformed and has been the place to be. So well done to Apple shareholders.

    Taking a quick look at the latest chart we get a similar story, however we would ask you to note the recent gains made by SLW since July, largely on the back of improving silver prices and the acquisition of additional revenue streams. The magnitude of this move has been phenomenal in our opinion. We now expect silver prices to continue to rally with SLW making very good gains.

    (click to enlarge)

    Putting the euphoria to one side we do expect Apple to plateau and possibly undergo a correction in the short term and Silver Wheaton to gain on the back of rising silver prices and therefore humbly suggest that Silver Wheaton will outperform Apple between now and the year end. By outperform, we mean that it will experience a bigger price increase in percentage terms. We will continue to monitor both companies between now and then and provide an update as and when there are any indications of substantial developments in the direction for either stock. So its a race to the end of the year between the Techies and the silver bugs, may the best stock win.

    For disclosure purposes we must point out that do own stock in Silver Wheaton and we do not own stock in Apple Incorporated, so our view should be considered in the light of that knowledge.

    Silver Wheaton Corporation trades on both the NYSE and the TSX under the symbol of SLW.

    Apple Corporation trades on both the NASDAQ under the symbol of AAPL.

    Bob Kirtley

    URL: www.skoptionstrading.com

    URL: www.gold-prices.biz

    Email:bob@gold-prices.biz

    Disclaimer: www.gold-prices.net or www.skoptionstrading.com makes no guarantee or warranty on the accuracy or completeness of the data provided. Nothing contained herein is intended or shall be deemed to be investment advice, implied or otherwise. This letter represents our views and replicates trades that we are making but nothing more than that. Always consult your registered adviser to assist you with your investments. We accept no liability for any loss arising from the use of the data contained on this letter. Options contain a high level or risk that may result in the loss of part or all invested capital and therefore are suitable for experienced and professional investors and traders only. Past performance is not a guide nor guarantee of future success.

    Disclosure: I am long SLW. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

    Tags: SLW, AAPL, long-ideas
    Sep 20 5:30 PM | Link | Comment!
  • The Next Time Silver Crosses $30.00 Will Be The Last Time

    It has been an interesting week on the economic stimulus front with what looks like a co-ordinated effort by the major powers to ignite their respective economies.

    The European Central Bank (ECB) made the headlines with a widely anticipated cut to its key interest rate of a quarter of a percentage point to a record low 0.75 per cent in an attempt to ease Europe's financial crisis and boost its stagnating economy. This move by the ECB will make it cheaper for people and the business community to borrow and ultimately spend this cheap cash.

    Next up to the plate was The Bank of England (BOE) chipping in with STG50 billion or US$77.62 as part of its Quantitative Easing stimulus package to boost Britain's recession-torn economy. The BoE also decided to keep its main interest rate at a record low of 0.50 per cent after a two-day monetary policy meeting.

    Then we have The People's Bank of China who decided to cut its benchmark lending rate by 31 basis points to 6.0 per cent.

    Now we wait patiently for the next shoe to drop, which belongs to the United States. This Friday another set of Non Farm Payroll (NFP) will be announced with the hope that they are somewhere north of 120,000 jobs. However, should this figure come in at sub 120,000 then the heat is back on the Fed to take action. If this figure is as low as 60,000, then Chairman Ben Bernanke will be required to move and move quickly. Our own opinion is that it will be a low number and therefore some form of QE3 will make an appearance albeit in drag if necessary. Any indication that QE3 is on the cards will ignite gold prices with a subsequent knock on effect lifting silver prices as the demand for both of these precious metals gains traction.

    All of the above represents a policy of cheaper money and more money, which is inflationary through the continuing debasement of our spending power. The lack of confidence in fiat currencies still exists despite the short term rally in the US dollar.

    You may recall the last time we updated the silver chart we said: "that silver could go as low $26.00, so acquire gently." That level is holding for now as the chart shows and the longer this sideways action continues, the bigger the move will be when it comes. Also note that the RSI has dipped below the '30' level and that silver prices did rise, but not in a convincing fashion, the 'tease' for silver bugs continues. However, rather like a bouncing ball the oscillations are getting smaller with every bounce. The trading range is narrowing and in the near term silver prices will break out of this range and move almost violently to new ground. As we see it the odds are skewed towards an increase in silver prices rather then a fall and once they do catch fire it will be dramatic. Once above the $30.00/oz level silver prices will experience a number of pullbacks, however, these pullbacks will be weak and short lived. The $30.00/oz price level will not be penetrated as each low will be a higher low than the previous low. The $30.00/oz level will become the new support for silver prices.

    (click to enlarge)

    To conclude we politely suggest that you accumulate as and when you can and that you do not sell any of your physical silver bars or coins, you might be just offering someone else a real bargain. As for the stocks we remain skeptical about their ability to perform, its not happening for them at the moment and we need to see some signs of investor interest in the producers before we decide to increase our exposure to them. At the same time we are not selling any of our silver producers as we purchased them early in this bull market and they owe us nothing.

    Now for those of you who are adrenalin junkies you may want to consider allocating some of your funds to a few well thought out options trades. As we see it options are the only vehicle offering leverage to the underlying movement of silver prices. You will need to be highly selective, totally focused and disciplined. Once you have made a purchase the clock is working against you and Theta is your enemy as the time premium erodes with each passing day. As a trading strategy the use of options will not suit everyone. A speculator needs to be nimble and prepared to move quickly. Unlike the acquisition of stocks where a speculator can adopt a 'buy and hold' strategy, time is against you in that the value of the option erodes as time elapses.

    So if we have stimulated your interest drop by and see us some time.

    We hope that you all had a very good Thanks Giving break, however, its behind us now so get your game face on, the second half promises to be explosive, one way or another.

    Bob Kirtley

    URL: www.skoptionstrading.com

    URL: www.gold-prices.biz

    Email:bob@gold-prices.biz

    Disclaimer: gold-prices.net or skoptionstrading.com makes no guarantee or warranty on the accuracy or completeness of the data provided. Nothing contained herein is intended or shall be deemed to be investment advice, implied or otherwise. This letter represents our views and replicates trades that we are making but nothing more than that. Always consult your registered adviser to assist you with your investments. We accept no liability for any loss arising from the use of the data contained on this letter. Options contain a high level or risk that may result in the loss of part or all invested capital and therefore are suitable for experienced and professional investors and traders only. Past performance is not a guide nor guarantee of future success.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Tags: BOE, NFP, long-ideas
    Jul 09 9:15 PM | Link | Comment!
  • Anatomy Of An Options Trade On The S&P 500.

    We have received a number of requests from our readers to explain in a little more detail how we make use of options trading as a vehicle to provide some leverage to our investments. As we have just completed our one hundred options trades we thought an explanation of this centurion trade would be a good example in order to demonstrate the mechanics of a real live trade.

    This trade involved the S&P 500 (SPY) and was executed as follows:

    Based on the view that the US stock market would rally leading into the Fed meeting we decided to buy call options on the S&P 500 ETF with the intention of moving into and out of this trade quickly.

    On the 11th of June we signaled subscribers to "… buy SPY Oct '12 $138/$140 Vertical Call Spread for a $0.82 net debit with 5% of our capital allocated to this trade".

    On the 19th of June, eight days later we told subscribers "We hereby signal to close our SPY Oct 20 '12 $138/$140 vertical call spread for a $1.03 net credit with 5% of our capital allocated to this trade". This means we have banked a 25.61% profit in just eight days!

    (click to enlarge)

    As you can see on the above chart, the S&P 500 rallied prior to the Federal Reserve FOMC meeting on the 19th.

    We were aware the Fed could've disappointed by not announcing QE3 at the meeting and hence equities would've dropped.

    We therefore decided to bank our profits on the 19th by closing out the position prior to the FOMC meeting.

    As it turned out the Fed didn't announce QE3 and as the chart shows equities sold off as we predicted.

    If we hadn't made the decision to close our trade prior FOMC meeting, we would be sitting on a small loss. This shows the importance of being nimble and being able to trade around significant events.

    We do not operate on a buy, hold and hope basis. We are a trading operation and this flexibility has enabled us to deliver strong returns ever since inception.

    The success of this SPY trade is not in isolation. This trade was our 100th closed. Out of those 100 trades, we've had 91 closing at a profit. Each trade (including losers) has generated an average return of 35.39% (meaning the 25.61% return on our latest trade is below our average).

    Our trading signals are open on average for just 50.55 days, so although we are a trading operation, we are not day traders. We believe our niche is between the buy, hold and hope investors and the hyperactive day trading strategies, and this niche has served us and our subscribers well since inception.

    Prior to signaling this trade, we communicated our thoughts on equities to subscribers in our weekly subscriber update, where we discuss the markets and offer analysis on where we think markets are headed and what our trading strategy is going forward:

    "… we are seeing some bullish signals for US equities. The signal we consider to be the most important is the sub-zero bullish MACD crossover. The chart below attempts to illustrate when the crossover has occurred before over the last five years, with successful signals in blue and unsuccessful ones identified in red.

    (click to enlarge)

    This crossover has occurred 18 times in the last five years, arguably being accurate on 14 of those occasions. This signal, combined with the fact that the S&P 500 has retraced roughly 50% of its rally since September and the possible lift equities could get from further Fed easing has now caused us to now become bullish on the US stock market.

    In terms of trading this move, we will look at taking some positions this week..."

    Shortly after updating subscribers on our outlook, on Monday the 11th of June we observed favourable buying conditions and signaled to our subscribers to do the following:

    "We hereby signal to buy the SPY Oct 20 '12 $138/$140 vertical call spread for a $0.82 net debit with 5% of our capital allocated to this trade.

    To execute this trade we are buying the $138 calls and simultaneously selling the $140 calls for a net debit for $0.82

    The risk in this trade is limited to the net debit. Therefore for every option contract in the spread we have $82 at risk.

    The return in this trade is limited to 143%, since this spread cannot be worth more than $2.00"

    The value in our service is not limited to the profits we generate for subscribers, we also provide full updates on a weekly basis outlining our thoughts and offering market analysis and guidance on our future trading strategy.

    We communicate our actions and intentions extremely clearly, spelling out in full detail what is involved when entering into each trade we place.

    For the more complex option trading strategies that involve buying or selling more than one call or put at different strike prices or expiration dates we give precise instructions on how to enact each leg of the trade in order to eliminate subscriber confusion and error.

    All of our trading signals contain strictly limited risk and that the full risk of any trade is always stated clearly.

    Not only do we instruct subscribers on what is involved and how to place a given trade, we quote live market prices at the time of sending to further eliminate uncertainty and maximise returns for our subscribers.

    We also advise on how much to allocate to each trade as a percentage of tradable capital based on our assessment of risk.

    It is these fine details that differentiate our service from many others that over-complicate, confuse and frustrate their customers with poor communication and muddy instructions. On top of our crystal clear trading signals, we are more than happy to answer any questions subscribers have about our trading recommendations or other inquiries about the service.

    Paramount to our success lies in the flexibility of options and the opportunities they provide. Had we of simply bought into the SPY ETF, we would have had zero leverage.

    We could have bought SPY shares at $132 on the 11th of June. We could have sold those shares on the 19th of June for $134.5 for a profit of 1.9%. Instead we banked at 25.61% profit by effectively using options!

    (click to enlarge)

    By using options we outperformed the purchase of the SPY shares 13.47 times over!

    We knew when entering into our options contract that the funds at risk were only $0.82 per contract - an observable amount we could quantify before entering into the trade.

    The maximum gain we could have achieved was 144%, as the spread was limited to closing at $2. This predictability is fantastic for calculating upside and downside potential and therefore, how attractive a given trade is based on one's outlook and risk-reward preferences.

    If one doesn't have the time to regularly monitor their emails in order to place our trading recommendations or simply wants a more passive way to use this type of service, then Global Autotrading and e-Option could be useful. These two services place trading recommendations on our subscribers behalf, meaning when we signal a trade the Autotraders automatically enter into it with the precise amount of your capital allocated based on our recommendation. There are some fees involved but the Autotrader services allow for zero subscriber participation for those seeking the ultimate in trading ease. We do not receive any compensation from Autotraders, they simply provide a service to make trading easier for the subscribers who are just too busy to take action at the appropriate time. The Autotraders are completely separate and independent of SK Options Trading.

    Hope this helps and please feel free to send in any questions that you may have about options trading and how you can gain leverage to some of the smallest moves in the financial markets.

    Bob Kirtley

    URL: www.skoptionstrading.com

    URL: www.gold-prices.biz

    Email:bob@gold-prices.biz

    Disclaimer: gold-prices.net or skoptionstrading.com makes no guarantee or warranty on the accuracy or completeness of the data provided. Nothing contained herein is intended or shall be deemed to be investment advice, implied or otherwise. This letter represents our views and replicates trades that we are making but nothing more than that. Always consult your registered adviser to assist you with your investments. We accept no liability for any loss arising from the use of the data contained on this letter. Options contain a high level or risk that may result in the loss of part or all invested capital and therefore are suitable for experienced and professional investors and traders only. Past performance is not a guide nor guarantee of future success.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Tags: SPY, options
    Jun 28 5:47 PM | Link | Comment!
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