Honest Silver and Gold, LP - turning silver into cash flow - Latest Comments

Re: How this Fund Works

honestsilver — Fri, 24 Jun 2011 00:30:42 -0000

Thanks! I don't think timing will be an issue as it will be based on whatever the market value is at the time. As the puts will be bought and sold within a day or two, the risk from volatility collapsing is minimal.

Re: How this Fund Works

adamcollins — Tue, 21 Jun 2011 17:25:12 -0000

I see. I wish you well in both your ability to time put purchases when implied volatility is low and your ability to scale the idea.

Re: How this Fund Works

honestsilver — Tue, 21 Jun 2011 15:48:42 -0000

Well that's just it, there aren't very many good buyers for gold and silver in the marketplace for the individual. Best case scenario, someone has some old silver or gold coins and can sell them on eBay. eBay and PayPal take 13% off the top. Coin shops take as much as 30%.

If they go to your average "we buy gold" store, they'll only get 20-60% of the melt value. The payouts on scrap gold and silver are even worse than for coins.

We pay top prices, and we can do so because of the synthetic straddle created with the puts that complete the strategy. Elimination of the volatility risk is what allows Honest Silver to operate on thinner margins.

Re: How this Fund Works

adamcollins — Tue, 21 Jun 2011 13:44:00 -0000

So it seems like at the heart of this fund is not really any sort of strategy, it's your ability to buy physical silver below market prices. How long do you think someone will be comfortable with consistently getting less for their physical silver by selling it to you when they could sell it (wherever they are) to someone else for a higher price?

Re: How this Fund Works

honestsilver — Fri, 17 Jun 2011 09:26:46 -0000

This might show up twice...

No, the silver being owned is actual, physical silver (or gold) bought at under market prices. The puts being bought as coverage are on the silver securities in the stock market like SLV and GLD.It performs somewhat similar to a covered call in that there is a long position and a short position.The difference (besides that one leg is physical and not a security) is that in a covered call you buy at market and then either sell the covering for cash flow and keep the long leg or the stock price rises and you sell both. In this fund, the profits are made by buying below market and the short leg only acts as a buffer against volatility in the market price.

Re: How this Fund Works

adamcollins — Fri, 17 Jun 2011 01:22:13 -0000

And maybe placing a straddle or strangle occasionally to benefit from increased volatility.

Re: How this Fund Works

adamcollins — Fri, 17 Jun 2011 01:15:31 -0000

This sounds as if you're owning SLV and writing covered calls monthly.