Unusual trade in obscure silver ETF

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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 ( ZSL ), 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 Chart 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 higher.

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 been bearish.

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 November expiration.

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 average today.

(Chart courtesy of tradeMONSTER)

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Copyright © 2010 OptionMonster® Holdings, Inc. All Rights Reserved.



This article appears in: Investing , Options
More Headlines for: GLD , SLV , ZSL


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