Silver Options Trader Bets $1 Million on Price Drop by July
April 11 (Bloomberg) -- Bruce Kasman, chief economist at JPMorgan Chase & Co. in New York, talks about the impact of oil prices on global growth, the outlook for the U.S. economy and Federal Reserve monetary policy. The U.S. economy will expand 2.8 percent this year, down from the 3 percent projected in January, the IMF said today. Kasman speaks with Mark Crumpton on Bloomberg Television's "Bottom Line." (Source: Bloomberg)
A trader’s almost $1 million bet that an exchange-traded fund tracking silver will decline by July was today’s biggest single options trade on U.S. exchanges as futures on the metal reached a 31-year high.
The 100,000 puts, or options to sell 100 shares each of the iShares Silver Trust (SLV) at $25 by July, changed hands at the ask price of about 10 cents and exceeded the open interest of 6,054 outstanding contracts before today, indicating that a buyer of a new bearish position initiated the transaction. The ETF rose to $40.33, the highest intraday level since trading began five years ago, before falling 1.6 percent to $39.21 at 4 p.m. New York time. It hasn’t closed below $25 since November.
“It’s definitely a massive downside bet on silver,” said Henry Schwartz, president of Trade Alert LLC, a New York-based provider of options-market data and analytics. “It’s so far out of the money that the buyer is probably just looking for a moderate pullback because a $3 retracement to where it was in March could double the position to $2 million.”
Silver for May delivery in New York climbed as much as 3.4 percent to $41.975 an ounce, the highest level since January 1980, when futures reached a record $50.35. It last traded at $40.61. Silver, where half of global consumption is industrial, has been rising because it benefits from a rebounding global economy as well as demand for a haven, according to UBS AG.
The trade accounted for almost a quarter of the 385,667 silver ETF puts changing hands today, the most since November and five times the four-week average. About 1.2 puts traded for each call.
To contact the reporter on this story: Jeff Kearns in New York at jkearns3@bloomberg.net.
To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net.
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