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USLV Is A Precious Lotto Ticket That Could Pay Off Big Time


  • Silver's trading range will eventually break to the up or downside.
  • Three reasons odds favor the upside.
  • Silver bullion is the best bet.
  • SLV is a medium-term investment vehicle.
  • USLV is for market timers and short-term traders, but it could turbocharge results.

Silver is the most volatile precious metal that trades on the futures exchange. When it comes to the four precious metals, silver tends to move more on a percentage basis, over short periods, than gold, platinum, or palladium. Silver's penchant for a high degree of price variance comes is the result of speculative interest as herds of buyers or sellers tend to embrace the metal when a price tend develops. Since the late 1970s, on two occasions the price of silver exploded to around the $50 per ounce level. In 1980, the price of nearby COMEX silver futures peaked at $50.36 per ounce, and in 2011 it got up to a high of $49.82.

Memories of fantastic rallies in the precious metals in those two years have remained in the heads of many market participants. Silver last traded below $10 per ounce back in 2008, which is now a decade ago. It has not dipped below the $13.635 level in the COMEX futures market since December 2015 and is currently sitting around the $16.50 level.

Silver's trading range will eventually break to the up or downside

Since the beginning of 2017, the price of silver traded in a range of $15.15 per ounce to a high of $18.655, a band of $3.505. So far, in 2018, the precious metals range has narrowed to $16.13 on the lows and $17.705 on the highs, and the $1.575 spread is less than half its level over the past over fourteen months.

Source: CQG

As the monthly chart of COMEX silver futures highlights, the narrowing trading range has caused monthly historical silver volatility to drop to its lowest level in years at 12.92 percent. The price of silver has experienced a prolonged period of consolidation that has prevented the precious metal from breaking to the up

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This article was written by

Andrew Hecht profile picture

Andrew Hecht is a 35-year Wall Street veteran covering commodities and precious metals.

He runs the investing group The Hecht Commodity Report, one of the most comprehensive commodities services available. It covers the market movements of 20 different commodities and provides bullish, bearish and neutral calls; directional trading recommendations, and actionable ideas for traders. Learn more.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

The author always has positions in commodities markets in futures, options, ETF/ETN products, and commodity equities. These long and short positions tend to change on an intraday basis.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (17)

Does anyone here know the approximate percentage of precious metal futures open interest that is held by ETFs or ETNs?
agent bitter profile picture
maybe next 7 days will mirror feb 27-march 5 but slightly higher?
Moon Kil Woong profile picture
The issue is that holding the ticket is really bad long term. Unless the move is short term it's best not to own this.
Dr Rick Gold profile picture
I’m long USLV and UGLD as of a week ago, equal position sizes. Place limits last night and luckily doubled up both positions at 10.20 and 11.43 respectively. Coiled springs are what they feel like. Looking for about 20% pops.
Jetman48 profile picture
Today was very surprising action from Gold and Silver. I took some long options positions but this action doesnt make a lot of sense lately. I would have expected much higher prices given the volatility and overall lack of stability in politics and market. Long SLV and SAND.
BTW, there seems to be very little difference between USLV and JNUG, apart from the latter being more leveraged. 1,3 or 6-month charts look almost identical, and 12-month chart is very similar.
billrampart profile picture
A reasonable alternative is PSLV. Low fee, easily traded.
07 Mar. 2018
I have been following USLV for a few years now. It's move in 2016 reminds me of Andrew's comment about upside, when USLV hit a sweet spot, as did the gold ETF, NUGT.

The biggest plus to silver presently is the large stash of silver bullion that JP Morgan holds in its vaults. Currently between JPM's own warehouse and its Comex warehouse it holds around 700 million ounces of silver. The silver pricing mechanism is still under the control of the Comex futures speculators, the Banks on one side and the Managed Money on the other. No other speculators hold the amount of silver that JPM does.
You had me at "USLV is like a silver lotto ticket, but the payoff can be considerable for those who time the market well."
Because as Warren Buffet might say (if he was drunk) "there's no better investment than buying a lottery ticket." And we all know that timing the market is a great way to insure spectacular returns.
Another fine Andrew H SA contribution. When he speaks, I listen. BTW, several years ago, I bought my wife a dozen silver dollars and have felt comfortable that she has some kind of hedge, aside her equity IRA. Too, USLV is too risky for my cautious taste in ETF's.....
astute pathways profile picture
The 2008 financial crisis is proof that silver does not go up in bad times....Silver went down....However,demand was very very high,and I was paying a $3 premium over spot
Andrew, how do you manage to make noticeable gains with USLV during one daily session? It goes up or down much more between sessions and then trades within a 3-5% daily range. There are exceptional days of course... It seems to me that longer-term, holding it up to several weeks, seems a better strategy, going in at around $10 and out at $13-15. There have been 3 or 4 swing within this range in the past year. I'm still looking at it and theorising though :-)
Audiosticks451 profile picture
" You can lead a horse to water, but a pencil must be lead." - Soupy Sales
Soupy Sales!!! Ah, the childhood memories...:-)
9681901 profile picture
R.I.P. Soupy Sales: http://bit.ly/2G3raRn ... excerpt:

"He was one of my earliest and most beloved TV memories. His zany antics were as addictive as his primitive hand puppets. But it was his dangerousness that made people tune in. That laughter could turn into a pie in the face, or even to rage, at a moment’s notice. The mayhem even got him in trouble: when he asked kids to go through their parents’ pockets and send him greenbacks, the FCC squawked and Metromedia suspended him. The stunt eventually killed Soupy’s TV show. In interviews he said the media establishment never trusted him again. But as his fans grew up and into the emerging counter-culture, Soupy remained the epitome of cool for the rest of his life."

Funny that going through pockets looking for greenbacks never got any banksters or polliticians in trouble ... I guess comedians are held to a higher standard.
OK ya bunch of pilgrims! Ya forgot to give White Fang and Black Tooth their share of pats on the back, attaboys, and accolades. Dogs, after all, have a life too.
"Silver's penchant for a high degree of price variance..." - Author

It's funny, I had a horse that had a penchant for drinking water when I led him to it, while I carried a switch and a whip. So, you can lead a horse to water and make him drink, contrary to what many believe. I also had an aluminum paper weight that had a penchant for holding down paper. So yes, I do believe that silver has a penchant for being volatile at times.
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