The silver market is showing signs of stabilization, with prices hovering around $75 per ounce. While market sentiment is improving, some analysts are warning investors not to be swayed by hype on social media.
On Tuesday, discussions on social platform X centered on a surge in deep out-of-the-money call options for silver, with some mentions of December options with a strike price of $1000. Certain financial influencers have interpreted this wide spread as "smart money" betting on a significant rise in silver prices by the end of the year.
However, commodity analysts caution that such call options are nearly absurd and constitute "junk" trades.
One market analyst stated that these options represent an attempt to "hype" a return to silver's January highs, a move he predicts will trigger a new round of price collapse.
Carley Garner, co-founder of DeCarley Trading, noted in an interview with Kitco News that while the CME lists a December silver call option with a $1000 strike price, there are currently no open positions for this contract, meaning no actual trades have occurred.
She pointed out, however, that the emergence of such deep out-of-the-money options is driven by two main factors.
The first is due to market structure—retail investors seeking low-cost investment avenues.
"Silver options are expensive, so small retail speculators can only afford to buy deep out-of-the-money call options, as that's their only viable choice," she said. "The margin for silver futures currently exceeds $50,000, and an at-the-money call option for December 2026 costs about $60,000. If you want to take a long-term position with only a few thousand dollars at risk, the December $1000 call option becomes the only option."
She added that a similar situation occurred in the natural gas options market in 2022, where strike prices briefly reached $40.
"Even those buying the $1000 silver call options likely don't believe the price will reach that level; they just want exposure to the market without the margin pressure."
Garner stated that the second driving factor is more malicious—it mirrors the strategy used by Reddit traders during the GameStop short squeeze.
"If a large number of deep out-of-the-money call options are bought, market makers selling those options will be forced to buy futures to hedge their risk, potentially creating a self-reinforcing price increase. This pattern is unhealthy, detached from fundamentals, and essentially a pump-and-dump scheme."
Garner holds a bearish view on gold and silver, believing the parabolic rise over recent months is unsustainable. She also indicated that the hype in the options market is a bearish signal.
"Large-scale buying of these options pushes up implied volatility in the market," she said. "High volatility in the options market is always temporary and almost always precedes a trend reversal."
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