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Profit from These ETFs on Silver's "Short Squeeze" Buzz

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Silver price soared more than 6% on the Jan 28 trading session driven by growing rumors of a “short squeeze” in the precious metal. After GameStop (GME - Free Report) and AMC Entertainment (AMC - Free Report) , the Reddit’s “Wall Street Bets” forum is now eyeing to “short squeeze” the silver market, one of the heavily shorted markets with the majority of the short position bought by JP Morgan.

The WallStreetBets group is calling silver the biggest short squeeze in the world. A user on Reddit's WallStreetBets posted that the silver bullion market is one of the most manipulated on earth. Any short squeeze in silver paper shorts would be EPIC. Another post on the site said, "inflation-adjusted silver should be at $1000 instead of $25.”

Notably, short squeeze is a term used by market participants to refer to a phenomenon where short sellers in a stock, who have placed their bets on its fall, rush to hedge their positions or buy the stock in the event of an adverse price movement, in order to cover their losses.
This leads to a sharp rise in demand for the share, and a huge rally in share prices.

Apart from a potential short squeeze rally, the outlook for silver looks bright. This is especially true given the optimism over the global economic recovery in the post-pandemic world will likely boost manufacturing and industrial activities. Notably, silver is used in a wide range of industrial applications. About half of the metal’s total demand comes from industrial applications, while 30% comes from jewelry/silverware/coins and medal manufacturers (read: 3 Reasons Why Commodities ETFs May Rally in 2021).

The growing economy will also push up inflation, thereby leading to higher demand for silver as an inflation hedge. Further, the ongoing growth in the global solar PV industry, a rebound in global computer shipments, and new sources of demand for sensors used in IoT and OLED lighting will continue to provide a boost to silver demand. Silver is largely used for manufacturing of solar panels and electronics.

Given this, silver ETFs and silver mining ETFs rallied on the day. We have highlighted five of that led the way higher on the short squeeze buzz and could be compelling choices to play the trend in the days ahead. Acting as a leveraged play on the underlying metal prices, metal miners tend to experience more gains than their bullion cousins in a rising metal market (see: all the Materials ETFs here).

ETFMG Prime Junior Silver ETF (SILJ - Free Report) – Up 10%

SILJ provides direct exposure to the silver mining exploration and production industry by tracking the Prime Junior Silver Miners & Explorers Index. It holds 50 stocks in its basket with higher concentration on the top three firms. Canadian firms take the lion’s share at 73.5%, while the United States and Peru take the remainder. The fund has managed assets worth $659.3 million and trades in good volume of nearly 1.5 million shares a day. It charges 69 bps in annual fees.

Global X Silver Miners ETF (SIL - Free Report) – Up 8.4%

This product provides investors access to a broad range of silver mining companies by tracking the Solactive Global Silver Miners Total Return Index. It holds 42 stocks in its basket with double-digit concentration on the top three firms. Canadian firms take the largest share at 56.4%, while Russia and the United States round off the next two spots. The fund has managed assets worth $1.1 billion and trades in a good volume of about 553,000 shares a day. It charges 66 bps in annual fees.

iShares MSCI Global Silver Miners ETF (SLVP - Free Report) – Up 8.4%

This fund follows the MSCI ACWI Select Silver Miners Investable Market Index, providing investors exposure to companies that derive the majority of revenues from silver exploration or metals mining. It holds 31 stocks in its basket with Canadian firms making up the lion’s share at 61.4% while the United States round off the next spot with double-digit exposure. SLVP has AUM of $243.7 million and an average daily volume of about 212,000 shares. It charges 39 bps in annual fees.

iShares Silver Trust (SLV - Free Report) – Up 5.5%

The fund offers exposure to the day-to-day movement of the price of silver bullion. It is a ultra-popular silver ETF with AUM of $14.6 billion and heavy volume of 27.5 million shares a day. It charges 50 bps in fees per year from investors and has a Zacks ETF Rank #3 (Hold) with a High risk outlook (read: 10 Most-Heavily Traded ETFs of Q4).

Aberdeen Standard Physical Silver Shares ETF (SIVR - Free Report) – Up 5.5%

This fund has AUM of $896.5 million and trades in a good volume of around 756,000 shares per day on average. It tracks the performance of the price of silver less the Trust expenses. Expense ratio is 0.30%. SIVR has a Zacks ETF Rank #3 with a High risk outlook (read: Biden Favors $1.9T COVID Stimulus: ETFs to Win/Lose).

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