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LEAP option question........
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LEAP option question........

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Memphis,TN
 
Futures Experience: Advanced
Platform: ThinkorSwim,FXCM, Ensign Software
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LEAP option question........

Hey everyone, I'm somewhat new to LEAPs, and was studying various strikes and their Deltas, open interest and volume,as well as the 2014 and 2015 LEAPs for various Silver stocks, ETFs, etc.... So my question concerns Silver, and where it is in terms of the ratio compared to Gold, which is around 50:1 ( Gold to Silver ), when the normal Ratio of Gold to Silver is 16:1 Say I buy an option on a Silver ETF and it is an ( at-the-money ) strike price of $2.50 with a delta of .55 Now, given this scenario, If Silver catches up to Gold and gets back to where it normaly is, in regards to the 16:1 ratio, that would be a 3 time gain in Silver. So if in 1 year, Silver catches up and moves up 3 times from where it is now at around $30 an ounce, that would put Silver at $90 an ounce. So with entering a trade on a Silver ETF at $2.50 and it having a delta of .55, how much profit could we expect from a 3 time rise in Silver if it occurs within a years time ? Sorry if any part of my question sounds confusing, I hope the gist of what I'm trying to ask makes sense. Thanks everyone for your time and help, I really appreciate it - Mike

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  #3 (permalink)
Hyde Park,
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On Buying Silver Because Of The Gold To Silver Ratio - Seeking Alpha

With that said, since you are exploiting the difference in price between Gold and Silver, I personally think that an intercommodity spread might execute this trade idea better than a naked long purchase on a Silver option?

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