Silver options breakout strategy for 2021
Kitco Commentaries | Opinions, Ideas and Markets Talk
Featuring views and opinions written by market professionals, not staff journalists.
Over the past few months, we have been extensively covering the backdrop of gold, and by now, you should know the narrative better than anyone else. However, with the Fed showing their cards already and additional stimulus measures not taking place until after the election, it is time to put gold on ice and look for low-risk high reward opportunities in silver.
I already know what you are thinking; we have identified some undervalued mining stock that you might have overlooked. The reality is that most of you have invested in the broad spectrum of available mining stocks and bought extensive amounts of physical in the past, so you are well-positioned. However, investors with additional "risk capital" that want to target a potential "breakout" in silver above $29.50 consider using a calculated risk options strategy.
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With the March contract showing massive open interest already, we are concerned that the breakout may not occur until after the futures' expiration. Therefore, we recommend purchasing the April 2021 Silver futures $29.50 call option while selling an April 2021 Silver $35.00 call against it. The strategy will create a calculated risk Bull Call spread and costs $3,500 while your maximum gain would be $27,500 if silver futures close above $35/oz at expiration on March 25, 2021. We believe this strategy achieves a low-risk high reward profile. If you would like to be up to date on the developments and strategies we are deploying, please register for a Free two-week trial by clicking on the link here: The Blue Line Express Two-Week Free Trial Sign up.