Is Now the Time to Buy or Sell Silver?

NYSE: SLV | iShares Silver Trust News, Ratings, and Charts

SLV – After it’s recent reversal, is now the time to buy or sell silver? Analyzing options activity can give us some insight.

The story of the last month or so has been the rise in precious metals prices. Gold set record highs at more than $2,000 per ounce. And while not at record highs, silver was up over 60% for the year at one point. Whether talking about bullion, futures, or miners, pretty much any type of gold or silver investment was paying off big.

Then, on August 11, precious metals tanked. Gold futures dropped nearly 6% for the day, and silver got hit even harder. Silver futures plunged by almost 15% when all was said and done. After performing so well in previous weeks, the fall of silver must have come as a significant shock to investors.

None of this is to say that the precious metals run is over. It’s possible this is a brief correction on the road to even higher highs. Only time will tell when it comes to the longer-term performance of precious metals.

Is there anything we can glean from this recent action in silver? Should investors use this drop as a reason to exit the trade? Or, is the 15% decline in silver prices a reason to load up on the commodity at a discount?

One type of analysis you can do in this situation is based on options activity. That is, look at what’s going on in the options market to get some insight into what investors were thinking the day of the big drop.

iShares Silver Trust (SLV)

Looking at iShares Silver Trust (SLV) on the day of the drop, we can see a massive amount of options volume. Over 1.6 million options traded, which is four times the regular volume. Keep in mind, SLV is the most popular way for investors to gain exposure to silver.

The interesting thing is that despite the 14% drop in SLV (it fell slightly less than futures prices), most of the activity in SLV options was on the call side. When call action is extreme, it tends to be a bullish indicator. In this case, 73% of the activity was in calls. Think about it this way: an investor buys calls if they expect the underlying instrument to go up. However, even selling calls (especially out-of-the-money calls) is moderately bullish, such as a covered call trade.

One example of a straight-up bullish trade is an inter-market sweep of calls. That’s when the call buyer purchases every call available, across all exchanges, at a certain strike. In this case, a buyer purchased over 5,200 of the October 35 calls for 79 cents when SLV was around $25. The trader used an inter-market sweep and actually paid slightly more than the best ask price (77 cents) to do so. That’s certainly a bullish trade.

A lot can happen by October expiration, but buying more than 5,000 calls so far away from the current price definitely makes a statement. That’s not the type of trade that would typically be used as a hedge of a short position. In other words, it does seem to suggest the price of silver could be bouncing back in the next couple of months.

Want more great investing ideas?

Download free the “10-Step Options Trading Checklist” you need before making a trade.

The Virtual Trading Pit Is Open: Trade Set-ups, Training, New Trading Ideas

How to Try Out Options Without Risking a Penny


SLV shares were unchanged in after-hours trading Wednesday. Year-to-date, SLV has gained 40.41%, versus a 5.92% rise in the benchmark S&P 500 index during the same period.


About the Author: Jay Soloff


Jay is the lead Options Portfolio Manager at Investors Alley. He is the editor of Options Floor Trader PRO, an investment advisory bringing you professional options trading strategies. Jay was formerly a professional options market maker on the floor of the CBOE and has been trading options for over two decades. More...


More Resources for the Stocks in this Article

TickerPOWR RatingIndustry RankRank in Industry
SLVGet RatingGet RatingGet Rating

Most Popular Stories on StockNews.com


:  |  News, Ratings, and Charts

How Long Will This SUCKERS Rally Last?

As quickly as the S&P 500 (SPY) fell in September it has bounced as quickly to start October. Yet with inflation still raging, and the Fed likely to keep raising rates that also harms the economy...it becomes hard to get long term bullish at this time. So let’s discuss what this all means for the market outlook...trading plan...and top picks to profit in the weeks and months ahead.

:  |  News, Ratings, and Charts

2 Stocks Under $50 Worth Snapping up Right Now

With the market volatility and odds of recession perpetually increasing with every interest rate hike by the Federal Reserve, investors would be advised to load up on attractively priced stocks of businesses with robust demand and stable growth trajectory. Hence, fundamentally sound stocks Kroger (KR) and APA (APA), currently trading under $50, could be ideal investments. Keep reading…

:  |  News, Ratings, and Charts

3 Stocks You'll Want to Leave out of Your Retirement Portfolio

The stock market is experiencing wild swings amid the consecutive Federal rate hikes and deteriorating investor sentiments. Moreover, the aggressive rate hikes are raising recession concerns. Therefore, fundamentally weak stocks Uber Technologies (UBER), Workhorse Group (WKHS), and AppHarvest (APPH) might be best avoided for your retirement portfolio. Also, these stocks do not pay dividends. Read on…

:  |  News, Ratings, and Charts

The Worst Stock to Buy During Times of High Inflation

Rent the Runway (RENT) is slated to cut its workforce by 24% in the face of declining consumer spending amid soaring prices. Its subscriber count dropped in the last quarter. The stock has lost more than 70% year-to-date. Given the stubbornly high inflation, RENT might be best avoided. Keep reading…

:  |  News, Ratings, and Charts

3 Stocks You'll Want to Leave out of Your Retirement Portfolio

The stock market is experiencing wild swings amid the consecutive Federal rate hikes and deteriorating investor sentiments. Moreover, the aggressive rate hikes are raising recession concerns. Therefore, fundamentally weak stocks Uber Technologies (UBER), Workhorse Group (WKHS), and AppHarvest (APPH) might be best avoided for your retirement portfolio. Also, these stocks do not pay dividends. Read on…

Read More Stories

More iShares Silver Trust (SLV) News View All

Event/Date Symbol News Detail Start Price End Price Change POWR Rating
Loading, please wait...
View All SLV News