Market News

November 28, 2012  Wed 10:18 AM CT

Bulls are snapping up calls in the ProShares Ultra Silver Fund as it pulls back from a huge run and tries to hang onto a key technical level.

More than 1,100 December 54 calls have traded in a strong buying pattern, with premiums rising from $2 to $2.50, according to optionMONSTER's Heat Seeker tracking system. The volume was triple the open interest at the start of the session, indicating new activity.

These long calls are looking for the AGQ to gain roughly 4.5 percent by expiration just before Christmas. The options could be sold at a profit earlier if premiums rise with a stock rally before then, but the calls will expire worthless if the shares are below the $54 strike price at expiration.

The AGQ, which is designed to provide twice the return of silver in either direction, is down 3.26 percent this morning to $54.05 but remains just above its 50-day moving average. The exchange-traded fund had gained about $10 since Nov. 3 as precious metals rallied but gapped lower yesterday as the broader market fell on "fiscal cliff" worries.

Total option volume is already nearly double the full-day average for the fund. Calls outnumber puts by about 30 percent so far today.

Disclosure: I am long the iShares Silver Trust.
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