What is the ETF SLV?
SLV ETF is an ETF that seeks to mirror the performance of the price of silver. The SLV ETF generally seeks to reflect the performance of the price of silver. The SLV ETF also seeks to reflect performance before payment of the Trust’s expenses and liabilities. The SLV ETF is not actively managed. It does not engage in any activities designed to obtain a profit from, or to improve losses, caused by changes in the price of silver. The SLV ETF receives silver deposited with it in exchange for the creation of Baskets of Shares, sells silver as necessary to cover the SLV ETF’s expenses and other liabilities and delivers silver in exchange for Baskets of Shares surrendered to it for redemption.
What are the Benefits of using the SLV ETF?
One of the major benefits of using the ETF is that it tracks closely with the price of silver. If you have a small account you don’t have to take the risk of buying a Sliver futures contract. One futures contract can be much more than the average person has to trade with. When buying the SLV ETF you can buy any amount you want. If you are a small trader you can trade silver using this ETF.
What are the Disadvantages of using the SLV ETF?
One of the main disadvantages of using the SLV ETF is gaps. The futures market is open all day with a small break. That means that the silver market trades night and day. With this type of trading you may get some gaps on overnight positions. If you had a silver position that hit a stop during the night the trader could close the position. With the SLV ETF the trader would have to wait until the stock market opens to close that position.
Can a trader trade SLV Options?
When trading options some options are just not worth it. Options move big in different directions. A Trader might be up 20% one second and down 50% the next on an option trade. This can be fool’s gold. The main problem with some options is the difference in the bid/ask spread. If a stock or ETF does not have much volume usually the options bid/ask is so far apart that just a purchase of that option would put the trader at more than a 10% loss. Then when the trader goes to sell they would lose another 10%. On that trade a person would have to make 21% to just break even. The SLV ETF has enough volume that the difference in the bid/ask makes it ok to use to trade options.
Trend Following SLV
Silver has been a long time favorite of many big name trend following traders as a small part of their overall trading system. Historically Silver and the SLV ETF perform well when used in a trend following system. If you look at the following chart you can see the downtrends that the SLV ETF has made in the past 2 years.
The next chart shows the uptrends that the SLV ETF made from 2008 to 2012.
So the SLV ETF is a good ETF to use in a trend following model. It is an ETF that we use in our trading system. With trend following it really does not matter if a stock or ETF is going up or down it just needs to move in one direction for an extended period of time.