Options Trading News

October 10, 2012  Wed 9:58 AM CT

Bearish plays dominate the unusual options action today, and the iShares Silver Fund is one of the biggest targets even as it rises.

The SLV is up 0.73 percent to $33.06 this morning after testing resistance at $34 for the last three weeks. But the previous rally off the 52-week lows below $26 in the previous two months was substantial, taking the exchange-traded fund back to levels last seen on the first day of March as it came off a high above $36 set the previous day.

Today's option volume is topped by a large combination trade in the January 2015 options. A trader bought 16,650 of the 26 puts for $3.55 and, at the same time, sold the same number of the 38 calls for $4.65. The volume was slightly more than open interest at each strike, indicating that this is a new position.

This combination trade takes in a credit of $1.10, which will be the profit at expiration if the SLV is between the two strikes. It could also be a collar on long shares in the SLV, protecting against a decline below $26 but giving up any gains beyond $38. (See our Education section)
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As I stated in last week's article, a break out or a break down needs to have a couple things happen before it is considered a confirmed break out or break down. The only problem is that in today's market where things move much more quicker than they did just a few years ago, two days could wind up being the majority of the expected movement, if not the whole movement.

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