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Call traders have taken to the iShares Silver Trust's (ETF) (NYSEARCA:SLV) options pits today, with volume running at roughly twice the typical intraday pace. Short-term contracts are in demand, too, as the ETF's 30-day at-the-money implied volatility has popped 4% to 17.8%.
Diving deeper reveals significant activity at SLV's weekly 6/27 19-strike call. Nearly 12,000 contracts are on the tape here versus just 3,909 in open interest, making it safe to assume fresh bets are being placed. What's more, 85% of the contracts have traded at the ask price, suggesting the at-the-money calls are being bought to open. Data from the International Securities Exchange (ISE) confirms this hypothesis.
By paying a volume-weighted average price (VWAP) of $0.25 for the calls, the traders are staring at an at-expiration breakeven mark of $19.25 (strike plus VWAP). Additional gains are theoretically unlimited north of here, while potential losses max out at the initial cash outlay, should SLV finish below the strike at next Friday's close, when the weekly contracts cease trading. At last check, the ETF was perched at $18.99.
Today's penchant for long calls over puts mirrors the recent trend in SLV's options pits. During the past 10 days at the ISE, Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), speculators have bought to open nearly five calls for every put. The resultant call/put volume ratio of 4.88 ranks higher than 88% of comparable readings from the past year, confirming the recent bullish bias.
On the charts, however, the iShares Silver Trust (ETF) (NYSEARCA:SLV) has struggled to surmount $19 for most of the past two months. If this level again rebuffs the shares, a capitulation among option bulls -- especially at out-of-the-money strikes -- could send the ETF lower.