2022 has not been kind to precious metals bulls. Despite the big run earlier in the year, we've seen one of the largest silver routs in history. Yet, the US dollar has been melting down since yesterday's Fed meeting, silver futures appear to have put in a base near trendline support levels, and the market is close to producing bullish moving average crossovers.
Despite these positive developments, silver can change direction on a dime in a merciless manner; thus, we like leaving quite a bit of room for error and/or keeping things small. Traders with high-risk tolerance could consider a bull call spread with a naked leg using the August 22.50/23.50 call spread and a naked 19.90 put. This creates a trade with little out-of-pocket expense and a profit potential of close to $4500. The risk is theoretically unlimited (like being long a futures contract) below $19.50. The market is currently near $22.00, so it gives the strategy about $2.50 in room for error at expiration. Because of the unlimited risk, it might be necessary to hedge downside risk by selling mini futures should the market move sharply lower.
Aggressive strategies with naked legs aren't for everyone and aren't appropriate for smaller trading accounts. One way to play the upside with a more manageable risk is via the Smalls Metals futures contract, which is a blend of gold, silver, and platinum with a margin of less than $500 and a point value of a dollar a tick. Another idea would be to buy a mini silver futures contract. It is a 1,000-ounce contract with a margin of less than $1,300 and a profit or loss of $10 per penny. A third "option" is to simply buy an August 25.00 call for about 18 cents or $900.
BUY AUGUST SILVER BULL CALL SPREAD WITH A NAKED LEG.
BUY 1 AUGUST SILVER 22.50 CALL.
SELL 1 AUGUST SILVER 23.50 CALL.
SELL 1 AUGUST SILVER 19.50 PUT.
*Total Cost = About 10 cents or $500.
These options expire on July 26, 40 days to expiration.
Margin = $5793.
Risk = Unlimited below $19.50.
Maximum Profit = about $4400.
OSIQ22 C22.5, OSIQ22 C23.5, OSIQ22 P19.5.
*There is a substantial risk of loss in trading futures and options. There are no guarantees in speculation; most people lose money trading commodities. Past performance is not indicative of future results.
*There is a substantial risk of loss in trading futures and options.
*Past performance is not indicative of future results.
Due to time constraints and our fiduciary duty to put clients first, the charts provided in this newsletter may not reflect the current session data.
Seasonality is already factored into current prices, any references to such does not indicate future market action.
These recommendations are a solicitation for entering into derivatives transactions. All known news and events have already been factored into the price of the underlying derivatives discussed. From time to time persons affiliated with Zaner, or its associated companies, may have positions in recommended and other derivatives. Past performance is not indicative of future results. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction. Seasonal tendencies are a composite of some of the more consistent commodity futures seasonals that have occurred over the past 15 or more years. There are usually underlying, fundamental circumstances that occur annually that tend to cause the futures markets to react in similar directional manner during a certain calendar year. While seasonal trends may potentially impact supply and demand in certain commodities, seasonal aspects of supply and demand have been factored into futures & options market pricing. Even if a seasonal tendency occurs in the future, it may not result in a profitable transaction as fees and the timing of the entry and liquidation may impact on the results. No representation is being made that any account has in the past, or will in the future, achieve profits using these recommendations. No representation is being made that price patterns will recur in the future.
Due to the volatile nature of the futures markets some information and charts in this report may not be timely. There is substantial risk of loss in trading futures and options. Past performance is not indicative of future results. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction.