Silver moved up again yesterday, and the options turned extremely bullish.
Earlier in the week, investors were buying short-term calls in the iShares Silverexchange-traded fund in hopes of a quick rally.
Now they’re looking out to the spring, buying big blocks of the June 35 calls and June 36 calls for $2.20 and $1.90 respectively. The trades occurred less than an hour after the open, and both appreciated about 10 percent as the fund pushed higher.
The ETF ended the session at $34.40, up 2.87 percent. The fund has climbed 6 percent in the last week, following gold higher.
Calls lock in the price investors must pay to buy a stock, so they can really appreciate if the ETF moves in the right direction. If it doesn’t those same contracts will expire worthless.
More than 228,000 calls traded in the ETF yesterday versus just 73,000 puts . Total volume was five times more than average.
—Pete Najarian owns long SLV calls.
More on ETFs:
- Gasoline ETF Rallies on Pump Prices
- Scorecard: The Best-Performing ETFs of 2012
Options Trading School: