After a long period of declining prices we finally saw a significant bounce on silver futures over these past couple of weeks. The question I ask myself is: Is this a good place to sell, is this just a bounce/short covering and the trend lower will resume?
Is this rally a beginning of a breakout to the upside and trend reversal?
Only time will provide the correct answer but until then I think the following two strategies are worth looking at:
1. Sell futures right around the $17 level and place a stop on the short along with another stop to go long if market breaks above $17.30 (see chart below).
2. Sell call option premium on rallies and sell put option premium on sell offs as we take the assumption that the market will be trading between $16 and $18 for the next few weeks. Selling premium is a dangerous strategy with unlimited risk.
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As I don’t see any major changes in the fundamental picture for silver, I like to use the chart and technical studies in an attempt to come up with a good risk-reward trade.
Silver Daily continuation chart (Heikin-Ashi) – current front month for silver futures is May.
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Disclaimer – Trading Futures, Options on Futures, and retail off-exchange foreign currency transactions involves substantial risk of loss and is not suitable for all investors. Past performance is not indicative of future results. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more of your initial investment. Opinions, market data, and recommendations are subject to change at any time.
About Ilan Levy-Mayer
Ilan Levy-Mayer has been a commodities broker for over 16 years, and holds an MBA in Finance and Marketing from Hebrew University in Jerusalem. Ilan is currently the vice president and a senior futures broker overseeing online future trading platforms and commodity futures trading systems at Cannon Trading Company.