SLV Options Pop Ahead of Historically Tough Month

Options traders are targeting a key technical level

Mar 29, 2018 at 2:28 PM
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Options volume is accelerated on the iShares Silver Trust (SLV) this afternoon, with nearly 70,000 calls and 35,000 puts traded. This is more than three times what's typically seen at this point in the session, with volume pacing in the 100th annual percentile. Diving deeper, it looks like speculators are targeting a key technical level for SLV ahead of a historically tough month.

Specifically, the April 16.50 call is most active in SLV's options pits so far, with 35,140 contracts on the tape. The bulk of this action -- including a 15,000-contract block -- appears to be of the sell-to-open kind, meaning traders expect the shares to churn below $16.50 through the close on Friday, April 20, when the front-month options expire.

This region has served as an overhead ceiling for SLV shares for some time, with the last monthly close north of here coming in August 2017. What's more, $16.50 coincides with a 23.6% Fibonacci retracement of the trust's rally from July through September of last year. More recently, the shares have been chopping between support at $15.30 and resistance near $15.90 since early February.

This disappointing price action could continue over the next several weeks, if history is any guide. According to Schaeffer's Senior Quantitative Analyst Rocky White, SLV has been one of the worst-performing exchange-traded fund's (ETF) in April, turning in a positive monthly performance in just three of the past 10 years. On average, SLV returns 1.31% in April -- a move that would put the shares right in the middle of their recent range, based on the current trading price of $15.40.

However, data from White shows SLV has been the best ETF in the second quarter -- potentially bad news for the massive amount of speculators that are currently short on silver. Over the last decade, the shares have ended the second quarter positive 90% of the time, boasting an average return of 9.7%. A similar swing higher would put SLV near $16.90 by the end of June, territory not seen since last September.


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