The silver market can be unpredictable, but savvy investors know there are ways to protect themselves while still staying engaged. And here’s the catch—sometimes, even when prices hit record highs, the real opportunity lies in managing risk carefully, especially in a volatile environment. But here's where it gets controversial: can you truly 'buy low and sell high' with such erratic movements, or is it smarter to borrow a page from seasoned traders and employ strategic hedging techniques?
Let's dive into the recent rollercoaster of silver prices and the popular ETF that tracks this shiny metal, the iShares Silver Trust (SLV). Just ten days ago, I touched on how SLV’s price was soaring, driven by a market that seemed in overdrive. Now, with the market dynamics shifting rapidly—prices falling sharply then bouncing back—it's clear how modern trading has fundamentally changed. Thanks to algorithm-driven trades and a surge of retail investors, what used to stretch over months can now unfold over days or even hours.
Taking a step back, let's examine the recent history—then look ahead to understand what might be next for this twin-star of precious metals and ETFs that mirrors silver’s price movements. 2025 has truly been a landmark year for silver—and by extension, SLV. Although I’d be tempted to call it a 'golden year,' that phrase could be misleading; after all, it’s silver, not gold. Despite a 9-10% intraday dip on Monday, SLV has gained over 140% this year, with just a handful of days remaining. This illustrates an extraordinary upward trend.
And the numbers are even more striking: SLV has hit new year-to-date highs 66 times—roughly every four days, on average. That’s a robust, persistent upward climb!
Here's a daily chart I affectionately refer to as the "Empire State Building" pattern. The rapid ascent resembles the iconic New York skyscraper, almost as if King Kong himself scaled to the top. Since August, the price has doubled, confirming this visual analogy. But, as a technical analyst, I see an environment that's now 'stretched'—similar to reaching the peak of that skyline—and traveling into uncharted territory, since the move has pushed SLV about 50% above its all-time high from 2011.
Is This a Break or a Pause?
Looking at this 'Empire State' pattern, the question arises: are we witnessing a breakdown that could lead to a reversal, or is this merely a healthy pause before the next leg up? Monday's trading saw multiple moving average crossovers, which usually signal a trend change. However, in today's markets—where algorithmic traders and retail investors don't always follow traditional signals—the old rules are less dependable. If they were, SLV might not have surged as dramatically as it did.
My goal isn’t to predict the future outright but to evaluate a spectrum of possible outcomes. This is where broader charts come into play—in this case, the monthly one that includes the 2011 peak. I see this moment as finely balanced—both bullish and bearish possibilities exist for SLV. It’s a 'wait-and-see' situation, emphasizing the importance of risk management.
For example, in my previous article from December 19, I discussed a 'collar' strategy—setting a ceiling at $76 and a floor at $60, creating a band within which the ETF could fluctuate with minimized risk. This approach, with about three months left to expiration, gives traders a way to safeguard gains or limit losses.
Currently, with SLV trading near $65, we see the options around these strikes as valuable tools. The $5.40 puts bought earlier are now worth around $4.20; the covered calls, which initially fetched $1.99, are now yielding about $3.70. This illustrates how volatility and time can vary the profitability of such strategies. Even if the ETF price doesn’t move much, these options provide a flexible safety net.
What Does This Mean for You?
This entire scenario provides a perfect lesson in how options collars work—and why they’re popular during turbulent times. Holding such a position through recent weeks might have alleviated emotional stress, offering a clear plan for potential outcomes. If SLV drops significantly, those puts could add $10 or more per share in value, offering substantial protection. Meanwhile, the premium income from covered calls could still be realized, and the entire position can be rolled or adjusted as the market evolves.
For traders without existing positions, elevated volatility creates attractive risk/reward opportunities, especially when using tools like option screeners—such as the one available on Barchart—that enable you to compare different strategies over various timeframes.
In summary, while trading inherently involves risk, tools like collars help traders sleep better at night—something particularly valuable during this busy, unpredictable season.
Rob Isbitts, founder of Sungarden Investment Publishing, is a semi-retired chief investment officer. To explore more of Rob’s insights or participate in investor coaching, visit ETFYourself.com on Substack. For copy-trading options, consider the Pi Trade app. Please note, at the time of writing, Rob did not hold positions in any securities mentioned. All data and insights are provided solely for educational purposes. For full disclosures, please review Barchart’s policy.
