Silver options breakout strategy for 2021

Updated: Oct 20, 2020

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, the strategy is to purchase 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.

By Phillip Streible - Chief Market Strategist

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Futures trading involves substantial risk of loss and may not be suitable for all investors. Trading advice is based on information taken from trade and statistical services and other sources Blue Line Futures, LLC believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades. All trading decisions will be made by the account holder. Past performance is not necessarily indicative of future results.

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