Option volume surged in an obscure exchange-traded fund today as
an investor looked to earn income from a bet against silver.
The transaction involved the ProShares Ultra Short Silver ETF (
), which moves twice as much as the metal but in the opposite
direction. The trader sold 3,100 November 32 calls for $3.20 and
bought an equal number of August 34 calls for $0.90 against
existing open interest.
ZSL dropped 4.3 percent to $32.70 in early afternoon trading. It's
down about 7 percent in the last month as silver has inched its way
The metal has been stalled at about $18 per ounce since October and
could reverse because gold has been also been showing signs of
topping out. Bryan McCormick identified a potential reversal in
gold more than a month ago, and the price action since then has
Today's option strategy apparently resulted from a short position
in the calls being rolled forward by three months. While the strike
price was also lowered by $2, the investor collected $2.30 from the
trade, meaning that he or she will make $0.30 for waiting until
The investor almost certainly owns ZSL shares and may have selected
the fund thinking that it's likely to appreciate or hold its
ground, allowing the trader to keep the credit with only minimal
risk of capital losses.
Overall options volume in the fund is about 10 times greater than
(Chart courtesy of tradeMONSTER)
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