Silver Stocks Shine in the Dead of Night

  • SumoMe

Alternate Title: What do Vampires and Silver Stocks Have in Common? (Answer: they both melt in the light  of day)

Bedtime checklist:

*Lock the doors, check.

*Brush teeth, check.

*Turn out the lights, check.

*Own silver stocks, huh?

Oh, and remember to sell those shares in the morning. In fact, you might even want to go ahead and sell short.

See also The Trend, the Trend, the Trend

OK, this is one of those admittedly “out of left field” trading ideas that seems too quirky to actually be of use in the real world. Still…..

The Comparison

This strategy involves Global X Silver Miners ETF (ticker SIL) that tracks a basket of silver mining stocks.

*Strategy A involves:

1. Buying ticker SIL at the close of trading each trading day and

2. selling at the next open.

*Strategy B – for comparisons sake – involves:

1. Buying ticker SIL at the open of trading each trading day and

2. selling at the close.

For the first test we simply:

*Subtract yesterday’s close price from today’s open price and keep a running total of the gain or loss (see the blue line in Figure 1)

*Subtract today’s open price from today’s close price and keep a running total of the gain or loss (See the red line in Figure 1)1Figure 1 – Raw $ per share gain (loss) for ticker SIL from holding a long position overnight (blue line) versus holding a long position between open and close (red line); 4/20/2010 to 11/14/2016

There clearly appears to be a positive bias to the “overnight” period (i.e., from the previous day’s close to the next day’s open) and a decidedly negative bias to the “daytime” period (i.e., from the open to the close each day).

Results

Let’s look at the same data a different way.

Since closing at $44.26 on its first day of trading on 4/20/2010:

*Ticker SLV has lost -$9.04 a share (closing at $35.22 on 11/14/2016)

*The cumulative gain from each day’s close to the next day’s open was $136.31

*The cumulative loss from each day’s open to the close of the day was (-$145.35)

See Figure 2

2Figure 2 – SIL shares have lost -$9.04 since inception (green line).  Lots of gain overnight (blue line); lots of loss intraday (red line)

Summary

I can’t say for sure if there is a tradable edge to holding silver stocks overnight. But I will say this – if you are planning today trade ticker SIL I sincerely urge you to play the short side of the market.

Jay Kaeppel

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