It seems the whole commodity complex has been taken out to the woodshed on the back of silver’s insane sell-off. Whether the bearish rampage lasts another day or week is anybody’s guess. If I were inclined to look for dip buying opportunities in this space I would focus on commodities that are holding up well in the face of such powerful selling.

Of the big three followed by most market participants – SPDR Gold Trust (NYSE: GLD), iShares Silver Trust (NYSE: SLV), and the US Oil Fund (NYSE: USO) — the chart of GLD currently looks the most appealing. The retracement is still relatively shallow and has thus far avoided breaching any significant support levels. Given the price range and mild mannered disposition of GLD I like the idea of selling out-of-the-money put spreads once the selling pressure abates.

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The put vertical spread consists of selling a higher strike put while buying a lower strike put of the same expiration month. The trade is entered at a net credit which represents the maximum potential reward. The best case scenario occurs if the underlying exhibits neutral to bullish behavior throughout the duration of the trade. Over the past six months the $140 level has established itself as an important line in the sand for GLD. It is likely to provide some type of support when tested in the future.

Due to the significance of this area consider selling the GLD June 140-135 Put Spread which consists of selling to open the GLD June 140 Put and buying to open the GLD June 135 Put. In timing the entry I would wait until GLD forms some type of short-term bottom and signals the selling pressure has eased.

Source:  MachTrader

At the time of this writing Tyler Craig had no positions in GLD.

Follow Tyler Craig on Twitter@TylersTrading.