Trade Idea Update: Silver

One month ago (05/12/22), we published a bullish metals trade idea. The trade consisted of buying an out the money call spread on SLV (Silver ETF) expiring in June 2023:

Long OTM Call Spread

Share price: 21.08
buy 10 SLV Jun23 22 Call @ $1.66
sell 10 SLV Jun23 25 Call @ $0.89

Trade Idea 05/12/22

Bullish Silver ETF (SLV)

Buy 10 SLV Jun23 22 Call @ $1.66
Sell 10 SLV Jun23 25 Call @ $0.89

Initial outlay: $0.77 per lot ($0.77 x10 x100 = $770 total outlay for 10 lots)

Maximum Profit $3,000
Maximum Loss $770

Net profit: $2,230 ($3000 – $770)
(Prices correct as of 02/12/22)


SLV is now trading at $22.5.

If you were to close the position you could have sold the Jun23 22 Call @$2.2 and bought back the Jun23 25 Call @$1.1, crystallising a profit of 43% ($330) in just one month.

Alternatively, you could have sold the 22 calls @2.2 to buy the 23 calls @$1.8, locking in $400 with a scope for further upside between now and expiry in June.

There are many other ways of managing this position. For example, you think that SLV could trade higher than $25 between now and expiry in June, you could buy back the short 10 SLV Jun23 25 Call @$1.11 ($1100), effectively removing the cap and allowing for unlimited upside. This strategy carries more risk because if the price of SLV were to crash, the trade has become more expensive and the 22 call could potentially lose all of its value.

If you enter into a fresh position today, you may consider buying the Jun23 23 Call and selling the Jun23 26 Call which will have the same upside potential as the idea above and a similar initial outlay.

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