Mike Butler Collected $2,300 in Premium on One Silver Position

SLV

The speaker proposes a put ratio spread strategy on SLV, buying a 53 put and selling two 51 puts to reduce cost basis and capture premium. The strategy aims to benefit from a drop in the underlying asset while limiting risk through the ratio of long and short positions. The breakeven point is calculated at 4820, with a max profit of $280 if the underlying expires at 51. The strategy is suitable for short-term volatility and price movements, with the potential to reduce the basis of the long position.

SLV

The speaker is looking to capitalize on the upward movement of SLV by using a vertical spread strategy. If the price continues to rise, the speaker can collect premium and reduce the cost basis. If there is a downside move, the speaker can adjust the position by adding more shares at a lower basis, thereby reducing the overall cost basis and increasing the potential for future gains.

Cost Basis Reduction Through Rolling Strategies

The speaker discusses using rolling strategies to reduce cost basis in a long position, such as rolling down strike prices on strangles and straddles. This approach allows for capturing extrinsic value while maintaining a wide range of potential outcomes. The mechanism involves adjusting positions as the underlying asset moves, thereby reducing the breakeven point and increasing overall profitability.

Cost Basis Reduction Through Multiple Trades

The speaker explains how buying additional shares at a lower basis can reduce the overall cost basis of a position. By purchasing 100 shares at $51 and combining them with existing shares at $87, the average basis is reduced to around $67-$68. This strategy allows for a lower break-even point and creates opportunities to sell premium against more shares.

How does the speaker reduce cost basis on SLV?

The speaker reduces cost basis on SLV by rolling down strike prices on strangles and straddles, capturing extrinsic value as the underlying asset moves. This involves adjusting positions to lower the breakeven point and increasing overall profitability.

TakeawayRolling down strike prices on strangles and straddles can reduce cost basis and capture premium.

What is the maximum profit on the isolated trade?

The maximum profit on the isolated trade is $280 if the price expires exactly at $51.

TakeawayThe maximum profit is contingent on the price reaching a specific level.