Option Millionaires

[VERITAS77]

By Murray Coleman

The single biggest options trade today was a nearly $1 million bet by a trader that the iShares Silver ETF (SLV) would fall 37% by July, according to Bloomberg.

The ETF was heading up this morning, reaching an intraday high of $40.31 a share around 10 a.m. eastern time. But a little more than an hour later, it started a slow yet definite downward spiral. A logical assumption was that the white hot precious metal had overheated.

The move up by SLV had been mirroring that taking place in futures markets. That led some analysts to predict that it was time for silver’s march to slow. Late in the session, the ETF’s hovering around $39.07 a share, down almost 2% on the day.

Unlike the ETF, silver futures managed to hold onto their gains on Monday. Contracts for May delivery in New York gained less than a penny but still settled at $40.61 an ounce, setting a new 31-year high. Futures had traded as high as $41.98 an ounce earlier.

Someone bought 100,000 puts, or options to sell 100 shares each of SLV at $25 by July, changed hands at the ask price of about 10 cents and exceeded the open interest of 6.054 outstanding contracts before today — indicating that a buyer of a new bearish position initiated the deal, according to the report.

The trade accounted for almost two-fifths of the 257,312 silver ETF puts changing hands today, the most since November and triple the four-week average.