Gold has been climbing at a staggering rate and recently hit another all-time high. But if you have only been focused on gold, you might have missed what silver has been doing. If you thought gold was on the move, silver has easily outpaced it and by a lot.
Why Has Silver Spiked?
Keeping it simple, it is supply and demand. More than half the demand for silver is industrial. More semiconductors, batteries and electronics in general have driven up demand for silver. The metal is also used heavily in solar panels, and installations keep hitting record highs. For years, there have been silver supply deficits. With demand increasing, the cost goes up.
Like gold, silver is viewed as a safe haven when worry grows about inflation and geopolitical threats. Gold prices are extremely high (with GLD trading at just under $400 at the time of this writing), which makes silver much more attractive. And lastly, just look at the chart below. Talk about bullish momentum!
Silver Running Wild
Check out this recent 6-month chart of SLV (iShares Silver Trust). It has easily more than doubled over the past several months. Who wouldn’t love their stock position to do the same?
In addition, the implied volatility has shot through the roof. Look below at a screenshot of recent IV/HV levels. As you can see, it is the highest it has been in the past 6 months.
Option Plays
In MTM’s Group Coaching class, we have modeled out several positive delta strategies on SLV over the past several months, including bull call spreads and call diagonals. In fact, I closed out a call diagonal I’d had on for several days this past Friday for a nice little profit. Bull put spreads and cash-secured puts for investors are inviting, especially when IV levels are elevated as we are currently seeing. I just modeled out a 59/60 bull put spread in class the other day that did well.
Final Thoughts
The key to any option position is the management aspect, so make sure you know how you will manage the trade before entering it and don’t be greedy. With an extended move higher in silver and SLV, there will be a pullback at some point. Will buyers see this as an opportunity, or will the bullish exuberance wear off? Only time will tell but most “experts” believe there is room for the metal to move higher. I certainly hope it does!
John Kmiecik
Senior Options Instructor
Market Taker Mentoring
