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Option Bulls Ignore Charts, Bet On iShares Silver Trust (ETF) (SLV)

Call buyers think iShares Silver Trust (ETF) can hurdle potential technical resistance

by 4/22/2014 12:18 PM
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iShares Silver Trust (ETF) (NYSEARCA:SLV) calls and puts are both trading at a faster-than-usual clip today. Specifically, 36,000 calls and 15,000 puts are on the tape, compared to an expected intraday volume of 23,000 and 10,000 contracts, respectively. Against this backdrop, the stock's 30-day at-the-money implied volatility (IV) has surged 5.4% to 24.3%, signaling strong demand for short-term options.

Far and away the most active SLV strike is the June 19 call, which has seen more than 23,100 contracts cross the tape, mostly in a series of small and mid-sized blocks. Over 80% have traded off the ask, IV is moving higher, and volume outstrips open interest, pointing to buy-to-open activity. A portion of these new bullish initiations is confirmed by data from the International Securities Exchange (ISE).

In short, today's call buyers are looking for SLV to move north of the 19 strike by the close on Friday, June 20, when the back-month options expire. Earlier in April, this level acted as support and could now be switching roles to serve as resistance. No matter what happens, however, the most the bullish bettors risk losing is the initial premium paid.

Today's emphasis on call buying is just more of the same for SLV. On the ISE, Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the equity boasts a 50-day call/put volume ratio of 4.58 -- just 1 percentage point from an annual bullish acme. However, given the technical struggles of the iShares Silver Trust (ETF) (NYSEARCA:SLV) -- down 17.5% year-over-year at $18.63 -- an unwinding of these upbeat bets could result in contrarian headwinds.


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