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Caution reigns in Silvercorp

Silvercorp Metals is attempting to hold support at a key level, and investors are placing cautious trades.

optionMONSTER's tracking systems detected two large trades in the miner, which operates in China and Canada. The first trade appeared to be a calendar spread, with about 6,000 October 7 puts sold for $0.90 and roughly the same number of December 7 puts bought for $1.25.

The strategy reflects a belief that SVM will remain above $7 for the next eight weeks, rendering the contracts sold worthless. As long as the December puts could then be are then worth $0.35 or more, the position could be exited at a profit.

SVM rose 1.38 percent to $8.08 on Friday and is down 38 percent in the last six months. It's now trying to establish a double bottom around the same $8 level where it peaked in late 2009. The company produces gold, silver, zinc and lead.

Later in the session, investors purchased about 10,000 December 6 puts and sold 10,000 December 10 calls. Both priced for $0.90, resulting in no cost. The trade will profit from a drop and force the investor to sell stock above $10, so may have been the work of a shareholder looking to hedge a long position in the equity.

Overall options volume in SVM was 10 times greater than average in the session.

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

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

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