After reviewing the T3/OP video with Scott and Jill, it is prudent to have a hedge on your long gold positions given the political state in the macro environment since the markets are so sensitive to headline risk. Let's take a look at a low risk, medium reward put spread in

iShares Silver Trust ETF

(SLV) that can be used as an inexpensive hedge for long gold positions in case things change in the short-term as Scott's long-term thesis should remain in tact.

Silver has been outperforming gold now for at least the past two years. Thus, silver has in addition to being in a multi-year bull market has also spent some time in serious, highly volatile declines, the most recent being that during the period of late April to early May. went from the $47 range to the low $30s in one wild ride downward that only lasted a little more than a week in time, but for some if must has felt like "forever!" You probably will instantly recall my SLV "parabolic" put spread that almost did not pan out, yet did so with a vengeance during that SLV breakdown. Such are the ends of all parabolas involving hot stocks as well as hot metals!

Here we are, once again, dealing with new highs in gold but not new highs in SLV! That is both a "red flag" and a "green" one as far as my trading experience has taught me. Looking at the chart of SLV, I have SLV overbought and possibly making a lower high in this cycle.

Should gold be putting in a short term top, possibly in conjunction with a debt deal removing the one headline propping gold up, SLV could be hit by further selling that could start those long SLV to recall that selloff just a few short months ago. In addition, the longer term seasonal tendency for silver during the month of August is for silver to decline, if not dramatically so.

The trade that sets up now for any potential selling in gold and silver would be a vertical put spread in SLV expiring in September. Consider taking a contrary approach to all those who are now long gold and silver, instead bucking that crowd by executing a vertical put spread in SLV designed to profit nicely from a 10% or more correction in SLV. The trade is a medium risk trade because it is timed to profit from a reversal of the decent if not strong buying trend in precious metals that might not be complete. The trade has medium to high reward potential because of the overbought condition of SLV and the history of SLV to fall rather violently once the selling begins.

Trades: Buy to open 5 SLV September 39 puts for $2.30 and sell to open 5 SLV September 34 puts at $0.65.

The total risk for the trade is premium paid, or $825.

At the time of publication, Jill Malandrino and Skip Rashcke held no positions in the stocks or issues mentioned.

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Skip is a former registered options trader and member of the Philadelphia Stock Exchange. He was an equity options analyst and broker with Paine Webber and a proprietary trader for Van Der Moolen. He served in the USMC, as well as played minor league baseball with the N.Y. Yankees organization. He is an independent stock and options market consultant.