How To Make A 22% Yield From Rising Silver Prices

Precious metals—specifically, gold and silver—are having an excellent year. Gold is trading near record highs, and silver is at levels it hasn’t seen for over a decade. Since my strategies focus on income-paying investments, a silver-focused covered call fund gives the best of both worlds.

Earlier this year, we launched the first of our high-yield ETF research services to evaluate and recommend funds in the rapidly growing universe of income-enhanced funds using various option strategies. One significant benefit of these ETFs is that you can focus on specific underlying sectors, such as the S&P 500, QQQ, Treasury securities, or commodities.

Currently sponsored by UBS, the ETRACS Silver Shares Covered Call ETN (SLVO) stands out with its decade-long track record. Originally sponsored by Credit Suisse, which UBS acquired in March 2023, SLVO offers a unique investment opportunity in the silver market.

SLVO is structured as an exchange-traded note (ETN), which is an unsecured debt obligation of the issuer. ETNs are popular in Europe, where exchange rules make it difficult to issue ETFs. An ETN tracks the returns of a specified index. SLVO tracks the returns of the Credit Suisse NASDAQ Silver FLOWS 106 Index. The index tracks the notional returns from owning the iShares Silver Trust ETF (SLV) and selling 6% out-of-the-money call options.

With a current trading price of $78.40 per share, SLVO offers an attractive investment opportunity. The fund pays monthly dividends, which have varied from $0.299 per share to $2.124 per share over the last year. This wide range implies that SLVO can potentially yield returns ranging from the high single digits to the 20% range over time.

Silver has surged this year, and the SLVO total return has matched the gains posted by SLV. In a flat-to-down market for silver, SLVO will outperform. Of course, it’s great to get those hefty dividends every month.

In recent months, I have successfully recommended a tactical swap trade between SLVO and the ETRACS Gold Shares Covered Call ETN (USOI) to boost the income earned by my subscribers. This strategy, based on the principle that volatility drives option premiums, has proven to be effective in increasing the monthly distribution for investors. It is a testament to the potential of SLVO and the soundness of our investment strategies.

This post originally appeared at Investors Alley.

Category: Commodities