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The Coming Volatility Squeeze in Silver

 

Be Prepared

After the 30% haircut that $SLV received back in May, I commented that the best thing that could happen to long term silver bulls is a long period of consolidation.

And we got just that.

Now it may be time to flip the switch back on.

It's Not Just About Price Movement

Markets trade in cycles. Not just with price, but also with sentiment and volatility. $SLV has been experiencing a very low period both in actual volatility, as well as the perception of volatility.

First, we can look at a chart of $SLV overlaid with Bollinger Bands.

The bottom two panes show the average true range and the historical volatility. You can see that we have been in a downtrend of volatility, coming back to lows not seen since the market went truly parabolic. The price is above the Bollinger Bands, which are opening up, signalling a potential for an expansion in volatility.

Next, let's look at the 30-day implied volatility in SLV:

courtesy of livevolpro

courtesy of livevolpro

Also, back to levels not seen since the parabolic move.

What does this tell us? Regardless of your opinion on the direction of the shiny metal, I would definitely be a net owner of options on any trade.

by Steven Place

Steven Place is the founder and head trader at investingwithoptions.com/