Gold and Silver remain the only currency investors are likely to trust in the long term By: James Cordier, Michael Gross, OptionSellers.com If you are like me, you are probably beginning to get used to having a daily helping of "Euro Drama" along with your coffee and cornflakes in the morning. One day Europe is imploding. The next day, problem solved, buy it all. Repeat cycle weekly. As we have been discussing on our blog, this cycle will likely be continuing for at least the next 6-12 months. Meanwhile, back in the US, the "Super Committee" in Congress has failed to agree to a deficit reduction deal. What a surprise. It now becomes very possible that US debt could be downgraded once again. Both of these issues have and will continue to create some volatile swings in both Euro and Dollar values. However, longer term, it appears ever more likely that creating more money, through one method or another, will be the ultimate result of the current conundrum on both sides of the Atlantic. That means paper currency is worth less and it takes more of it to buy a lump of gold or silver. In other words, despite daily and weekly swings in the price of metals, the gold and silver bulls probably have it right. The good news is that the recent correction in the price of metals has created some Hefty deep out of the money put premiums. This is especially true in silver, where strikes are available at literally half the current price of the white metal. If you have been craving a strategy that allows you to position for higher silver prices in the future while being able to withstand a certain amount of near term volatility, this is it. Look to sell puts with strikes at the $16, $17, $18 levels on any further weakness in silver prices. A dip below the $30 level in silver futures would seem an exceptional opportunity for selling put premium. There is still plenty of premium available in the March contract which should offer rapid time decay. We wish all of our US readers a Happy Thanksgiving! For everyone, the lower volumes surrounding the holiday season can create inefficiencies in option values. These can be exploited by astute option sellers. Keep your eyes open. Clients can look for our updates on these kinds of options during the next month. James Cordier and Michael Gross are authors of The Complete Guide to Option Selling 2nd Edition (McGraw-Hill 2009). They are co-portfolio managers of OptionSellers.com, an investment firm that offers managed option selling portfolios for high net-worth investors.

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