The long-awaited and desperately needed pullback in precious metals has arrived. Like Thanos in The Avengers or Agent Smith in The Matrix, the retracement was inevitable.

You hear that, Mr. Anderson? That’s the sound of inevitability, that’s the sound of your death. Goodbye, Mr. Anderson

Agent Smith

I am inevitable.

Thanos

Short-term traders should have been stopped out when the upswing pivoted and the pullback began. If you were unwilling to sit through a retracement but did anyways, then you need to reexamine your rules for management.

Long-term investors gave back a fair bit of gains, but such is the price that must be paid if you want to get the bigger pot of gold at the end of the overall uptrend.

While the drop was due, I’ll be the first to admit that no one could have known the speed and depth of the descent. These kinds of corrections are born of steeply overbought conditions and speculative fervor.

If you’ve waited on the sidelines, watching from afar as the rocket ship blasted into orbit, now’s your chance to enter at lower prices.

The objective of today’s article is to highlight the various ways you can acquire exposure.

Pick Your Poison

Let’s explore three different strategies for gaming the pullback. I’ll use SLV as the underlying, but the same logic applies for GLD.

Long Stock

The most potent elixir available for gaming the next advance is long stock. It’s more expensive than the alternatives but offers unlimited upside and unfettered participation in the future legs of the silver bull market. As one who has owned shares of SLV during its rocket-like rise, I can testify of the fruits. Not having to re-sell more naked puts to maintain exposure, or worry about my delta dwindling has been nice.

Bull Call Spreads

When it comes to options trading, it should be noted that implied volatility is through the roof. The implied volatility rank stands tall at 64%, signaling that premiums are juiced. As a result, I’d rather buy call spreads than call options outright. Volatility skew also works to the advantage of the bull call spread. OTM calls are trading at higher volatility levels than ATM calls. This is a phenomenon I’ve discussed here with GLD options.

With SLV trading near $25, what if we bought the Oct $25/$30 bull call spread? It’s trading for $1.30, offering $3.70 of potential reward if SLV pushes back to $30 by mid-October. By risking $1.30 to make $3.70, the ROI is a mouth-watering 285%.

Naked Puts

The high implied volatility also works to the advantage of a naked put. How about getting paid for your willingness to buy SLV at a discount? The only drawback is that your reward is limited, but you can increase the payout by selling closer-to-the-money puts if desired.

Suppose you sold the Sep $22 put for around 85 cents per share. The initial margin requirement is only around $220. That means the $85 of profit works out to a 39% return. Needless to say, that’s really, really good return for a naked put.

If you wanted to do something similar with GLD, you might consider a bull put spread instead of naked puts to better control the cost.

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