According to Jay Kaeppel, part of his job is to help people "think like a trader."
One problem is that no two people look at the markets in exactly the same way. So, where one person sees opportunity, another person sees risk (come to think of it, that is kind of why the markets exist in the first place).
A good opportunity for that thinking is happening now in silver. The chart below displays the Annual Seasonal Trend for ticker SLV (iShares Silver Trust ETF).
Right now, we are entering a purportedly favorable time of year for silver. The first major thrust lasts from the end of June through early August, with its seasonal peak occurring in early September.
Does this mean that SLV is guaranteed to race higher in the months ahead? Not at all. Every year is its own roll of the dice. But if we look to put the odds on our side, this seems like a decent place to start.
Trend-wise, one can argue that SLV has gone nowhere for roughly 11 months. At the same time, another trader might focus on the daily chart and decide that with the 50-day average above the 200-day average and with the price of SLV still holding (just barely) above the 200-day average, the trend of SLV is still "up and to the right."
Implied Volatility for SLV options is not rock bottom, but it has come down a great deal from the levels in 2020 and early 2021. This matters because it means that the amount of time premium built into the price of SLV options has declined dramatically and that buying premium is a viable approach.
So, if one wanted to think like a trader and make a defined-risk trade that SLV will repeat its seasonal pattern while holding within its uptrend, options are a good alternative to committing all the capital it would take to buy SLV shares.
What else we're looking at
- A more detailed look at a trade involving SLV options
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