MarketMoodz
Silver's parabolic rally: hedge with options as price nears $103/oz
Silver trades near $103/oz as the rally intensifies, underscoring a window of sustained momentum. CNBC Pro's Michael Khouw lays out an options-based hedging approach, including a collar on SLV to fund downside protection while capping upside.
Key Takeaways
- Silver trades near $103/oz, signaling a continued parabolic rally.
- A collar on SLV is proposed: long March 31 $90 put and short March 31 $120 call to fund downside protection.
- A Hunt-style corner is unlikely, thanks to regulation and surveillance, though a sharp pullback remains a risk.
- The gold/silver ratio is about 48:1, well below the long-run average of ~64:1.
- Historical anchors include the 1980s peak near $50 and 2011 near $48 for silver.
People Involved
- Michael KhouwCNBC Pro writer/analyst
- Nelson Bunker HuntHunt Brothers co-founder (historical figure)
- William Herbert HuntHunt Brothers co-founder (historical figure)
Entities Involved
- SLV - iShares Silver TrustExchange-traded fund proxy for physical silver exposure
- CNBC ProFinancial news service where the analysis originates
MarketMoodz Analysis
The rally’s proximity to the $103/oz level matters for portfolio risk management. If price momentum persists, hedging via options can help protect gains without fully surrendering upside, particularly for investors with spot or ETF exposure to silver.
From a historical perspective, silver’s price path has oscillated between mega rallies and sharp drawdowns—the well-known 1980s spike near $50 and the 2011 rally around $48 frame today’s moves. The current discussion around a Hunt-style corner reflects market structure and regulatory changes since the 1980s, suggesting that a repeat of that era is unlikely even as volatility can spike.
Investors should monitor liquidity in the SLV options market, inventory levels at exchanges, and macro catalysts that could sustain or deflate the rally. If volatility rises or inventories tighten, hedges like collars could become more expensive, and price action around major thresholds—such as the $100 level—will be telling about risk appetite and hedging demand.
Source: Original Article
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