From a weekly performance standpoint, things seem better than they read. As of early Friday morning, Platinum, the worst-performing commodity, corrected 5%, Copper 4.9%, Crude 4%, Gold 3%, and Silver 1.5%. On Thursday, Gold and Silver futures attempted a recovery before the bell, but the Flash Services PMI number derailed all hopes after posting a number close to the highest level in more than two years. The Figure came in at 54.8, where a print above 50 indicates expansion and is a leading indicator of economic health. Hopes of multiple interest rate cuts faded in 2024, and swaps shifted to just one cut. Regardless of one cut, two, or three, one thing is clear: interest rate decisions cannot produce more Copper or Silver as supply deficits expand while demand improves.
Many of you have been patiently waiting for a pullback to add or establish positions, while others “actively trading” in the market have been raising stop losses to try and protect gains and manage risk. The sell-off this week allowed for another wave of new market participants. I always say that the Silver Army is all about strength in numbers; the bigger the Army, the bigger the price explosion. From a strategy standpoint, many of you actively trading through Blue Line Futures have bought calculated risk call options and call spreads to avoid having the FOMO of missing out on another potential run to $50-60-75/oz, which has been wise.
Example of a Silver Options Strategy
Many of you own physical Silver, and that is great; you are part of the one-percenters who recognize Silver as a store of value and hedge against inflation. The price of Silver tends to fluctuate with supply and demand and economic conditions with the number of participants, long or short, that drive price momentum. We firmly believe another “Commodities Supercycle” is underway, and we are constructing long-dated call spreads in the Silver market and recommending them to our clients.
For example purposes, one could purchase the September 2024 Silver futures $35.00 call option while selling a September 2024 Silver futures $37.00 call against it. The plan will create a calculated risk Bull Call spread and costs $1,200 plus any commissions and fees, while your maximum gain would be $10,000, less your initial cost, if silver futures close above $37.00/oz at expiration on August 27, 2024. We believe this strategy achieves a low-risk, high-reward profile.