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Option Traders Circle Surging Gold, Silver ETFs

The SPDR Gold Trust ETF (GLD) and the iShares Silver Trust ETF (SLV) are being bombarded by options traders

Jun 29, 2016 at 2:16 PM
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Gold and silver prices are on the rise this afternoon, along with the broader stock market. Along the same lines, precious metal exchange-traded funds (ETFs) the SPDR Gold Trust ETF (GLD) and the iShares Silver Trust ETF (SLV) are gaining ground -- and garnering the attention of options traders.

At last check, GLD has tacked on a healthy 1% at $126.52, and is just a hair's breadth from a nearly two-year high of $127.05, touched on Monday. In options land, puts are outstripping calls by a healthy margin, with buy-to-open activity detected at the August 115 put. By purchasing contracts at this out-of-the-money strike, options traders may be banking on -- or hedging against -- GLD breaching $115 by back-month expiration, at the close on Friday, Aug. 19.

Longer term, though, the SPDR Gold Trust ETF calls have held a decisive advantage over puts. In the past 10 weeks, traders have bought to open 2.11 calls for each put -- a ratio that ranks in the bullishly skewed 65th annual percentile. Likewise, the ETF's Schaeffer's put/call open interest ratio (SOIR) of 0.35 -- sitting below 79% of all comparable readings from the prior year -- demonstrates a pronounced call bias in short-term open interest levels.

Meanwhile, SLV options are crossing at more than double the anticipated intraday clip. By the numbers, 90,000 calls are on the tape, close to tripling the 33,000 puts exchanged. Digging deeper, one speculator may be rolling her long July 17 calls up and out to the August 17.50 strike, counting on extended gains over the next two months.

This is business as usual for the red-hot ETF, which has added 3% today at $17.41 -- and earlier notched an annual high of $17.52. During the past 20 sessions, options traders have bought to open more than five times as many SLV calls as puts.

That said, short interest on the iShares Silver Trust ETF jumped nearly 32% during the most recent reporting period. So, it's possible that short sellers have been purchasing calls to hedge their short positions against continued upside in the shares.

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