Commodities Essential - August 10, 2011

Alert: silver indecisive in gold’s shadow.

Let’s add ZSL … 

Silver investors seem torn between its role as a safe-haven and its role as a risk appetite play. As the market tries to digest what the Fed delivered in yesterday’s announcement, I think there are two key risks to being long silver here: 

1) Gold has been outperforming/leading silver on the safe-haven front; and gold looks in need of a correction. It is likely silver will mimic gold’s downside if/when it happens.

2) A new wave of risk aversion could overcome the markets and drag silver lower if it is determined that the FMOC announcement offers nothing substantial. 

Let’s add ZSL (ProShares UltraShort Silver Fund) as a short-term play to capture a sharp breakdown in silver prices. (Note: I am recommending a fairly tight stop-loss in case silver decides to play catch-up and follows gold sharply higher.)

Trade Essentials. 

ZSL (Last Price: $13.75)

Buy shares of ProShares UltraShort Silver Fund, symbol ZSL, at the MARKET. Then place an order to SELL ALL your shares of ProShares UltraShort Silver Fund, symbol ZSL, at $12.50, STOP. This order is good till cancelled. 

[Please note this is a 2x-leveraged, inverse fund which means it will move roughly twice as fast, and in the opposite direction, as the underlying price of silver.]