The iShares Silver Trust has rebounded sharply in recent weeks, handing significant profits to bullish option traders.
On Dec. 13, Investitute’s market scanners showed that 7,500 Weekly $14.50 calls expiring on Jan. 26 were bought for $0.57 to $0.59 with shares at $14.79. These were clearly new positions, as open interest in the strike was a mere 25 contracts before the trades occurred.
Those calls traded sold for $1.43 today, 2.5 times their original purchase price. The stock rose 7.5 percent in the same time, illustrating the kind of leverage that can be achieved through options.
Long calls lock in the price where a stock can be purchased, gaining with a rally and providing leverage to the underlying shares. The contracts can quickly lose value if the stock stalls or pulls back but also carry less risk than owning the shares themselves.
SLV was up 0.99 percent today to close at $15.89. The exchange-traded fund has rallied as the dollar has weakened and investors have viewered silver more as an industrial material than a precious metal.