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This morning, I am recommending a bullish trade on iShares Silver Trust (NYSEARCA:SLV).
Last week, I recommended a cheap, bullish trade on SPDR Gold Shares (NYSEARCA:GLD) because gold prices were above $1,300 per ounce. Investors are still seeking safety in precious metals, and I think silver, like gold, will continue rising.
Retreat Into Precious Metals
Gold is still above $1,300 per ounce. It pulled back slightly yesterday, but it hasn’t dropped down to retest support at $1,320.
Daily Chart of Gold — Chart Source: TradingView
As I’ve mentioned in the past, the rise in the price of gold tells us traders are looking for protection in commodities. If we look at the daily chart for silver, we can see that it has risen gradually since the end of May.
Daily Chart of Silver — Chart Source: TradingView
There is still a lot of uncertainty on the market. The U.S. is set to resume trade talks with China ahead of the G20 summit, but as we’ve seen in the past, that’s no guarantee that progress will be made.
While traders are expecting the Federal Open Market Committee (FOMC) to cut the overnight rate, they aren’t expecting that cut until July.
If anything goes wrong between the U.S. and China between now and the FOMC’s July meeting, we could see the market pull back again.
As long as traders combat uncertainty about trade with a push into commodities, I expect gold and silver prices to continue rising.
SLV Will Follow Silver Higher
Just as GLD tries to mimic the performance of gold, SLV tries to mimic the performance of silver. If silver rises, so will SLV. That means we can sell a put to collect income before silver starts heading higher.
Daily Chart of iShares Silver Trust (SLV) — Chart Source: TradingView
This morning I am recommending a put write with a strike price of $14. If we open the put write for $0.30, that puts our breakeven price for this trade at $13.70. SLV seems to have some support around $13.80, which should keep it above our breakeven price through expiration. Still, this is a high-risk trade, so take a small position.
Sell to open the SLV Aug. 2nd $14 put at about $0.30.
Note: There are several August expirations available for SLV options. Be sure you are opening the weekly options that expire on Friday, Aug. 2, 2019.
About Naked Put Writes
A naked put write is a bullish position in which you expect the price of the underlying stock to increase. If you are holding the SLV Aug. 2nd $14 put option at expiration and the stock is trading below the $14 strike price, you will be put the shares.
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Ken Trester is editor of the popular Maximum Options program. Trester has been trading options since the first exchanges opened in 1973 with a winning streak that goes back to 1984 with money-doubling average annual profits since 1990.