Bullish Strategy for the Silver Market


Silver is trading near one-year lows. One interesting way to play it would be for an upside movement using SLV, an ETF (Exchange Traded Fund) for silver. This is a very liquid ETF and the fills are usually good.

If you are bullish in the near-term, an option a strategy you could a strategy called the “call butterfly.” An example of this strategy would be to buy one April 13 call, sell two April 16 calls, and buy one April 19 call. Currently, you could get this trade filled for around $1.70 (of course, the price will fluctuate). If silver holds at around $15 and even goes up toward 16 by April expiration, you can have a very nice return.

A simple risk management plan would be remove the trade if it goes down by 10% or take profits on the p/l if it goes up 10% (the percentages are in relation to the butterfly’s total cost). For all three of this butterfly’s strikes, the open interest is high. Of course, greater open interest for a particular strike usually equals better fills because there are more people buying and selling at that point. This is just one strategy to keep in mind if you want to play SLV (with a slightly positive bias). Keep in mind that silver is driven by both its inherent metal value as well as its industrial uses.