Large Buy-Write Trades on The Silver Trust (SLV)

Shares of the iShares Silver Trust (SLV) are trading higher today by 0.40%, at $32.96. The fund has been tracking Silver futures higher over the past three months, rallying over 30% in the process.

Total options volume is running at 2x normal volume due to a large buy-write that traded out in January 2015, where the $26/38 strangle was sold 16,650 times, between the spread, for a net credit of $8.20.

The options sale coincided with the purchase of 1,165,500 shares of SLV at an average price of $33.01. This looks like an opening buy-write, where the trader goes long stock and sells long-term premium against the position to bet on decreased volatility over the holding period.

90-day implied volatility is registering 27.60%, holding only a slight premium over 30-day IV, at 26.23%. Perhaps what is more interesting here is that implied vol on the SLV has already been halved over the past nine months, when it was trading near 41%.

The trader is betting that expectations, as well as actual stock movement, will mimic near-term HV, which is only registering 17.77%.

The iShares Silver Trust seeks to reflect the price of silver owned by the trust less the trust's expenses and liabilities. The fund is intended to constitute a simple and cost-effective means of making an investment similar to an investment in silver. 

About Michael Zerinskas

Originally from Chicago, Michael J. Zerinskas began his career as an intern for a small high-frequency trading firm based at the CME; he then moved on to become Chief Options Strategist at Benzinga.com. Michael is now Unusual Activity Editor at The Options Insider, specializing in VIX, volatility, and flagging unusual activity.