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Bulls Rally as iShares Silver Trust (ETF) (SLV) Sees a Fed-Fueled Lift

iShares Silver Trust (ETF) option players bet on a quick move above $21

by 2/12/2014 9:34 AM
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Option Brief: Precious metals were buoyed yesterday by dovish comments from Federal Reserve Chair Janet Yellen. One benefactor was the iShares Silver Trust (ETF) (NYSEARCA:SLV), which tacked on 0.8% to close at $19.45. Against this backdrop, calls emerged as the options of choice, outpacing puts by a margin of more than 5-to-1.

The most active strike by a mile was the March 21 call, which saw 16,002 contracts change hands -- almost all of which did so on the ask side, pointing to buyer-driven activity. What's more, implied volatility ticked higher, and open interest added 14,363 positions overnight. Summing it all up, it appears that new bullish positions were initiated at this out-of-the-money strike. Considering SLV hasn't traded north of $21 on an intraday basis since Nov. 6, delta for the call is docked at 0.21, suggesting a slim 21% chance of an in-the-money finish on Friday, March 21, which is when the options expire.

In fact, for the majority of the past three months, iShares Silver Trust (ETF) (NYSEARCA:SLV) has been churning between the $18.50 and $19.50 levels. Should the ETF fail to break out of this range over the next five-plus weeks, though, yesterday's call buyers can rest easy knowing the most they have on the line is the initial cash outlay. According to Trade-Alert, the volume-weighted average price for the calls was $0.20 apiece.


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