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Silver options breakout strategy for 2021

Commentaries & Views

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. 

If you want to receive the new edition of our free "Gold Trends Macro Book," it is updated with silver slides. This monthly updated booklet will provide you with all the quantitative analysis of the precious metal markets. You can request yours here: Free Gold Trends Macro Book.

The Strategy

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.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.