Traders Betting on 60%+ Rise in Silver

Source:

"A bull call spread in January 2011 contract on the silver ETF today suggests SLV shares may rally significantly. . ."

Today's trade of the day brings you the silver trade. Some wildly bullish options activity was seen in sizable purchases of the Silver ETF (SLV). Investors expect as much of a 66% gain in silver prices over the coming two years. It would certainly be interesting to hear the macro landscape this investor assumes is ahead of us. One can only imagine that they are betting on full-blown economic meltdown or hyperinflation. Whether this is a sign of the bubbly feeling in this market or rational trading is highly debatable.

SLV iShares Silver Trust ETF A bull call spread in the January 2011 contract on the silver ETF today suggests shares of the SLV may rally significantly over the next year and two months time. Shares of the SLV are currently up 0.5% to $18.23. The silver-bull purchased a ratio call spread by buying 3,000 calls at the January 23 strike for an average premium of 1.93 apiece, and selling 6,000 calls at the higher January 30 strike for about 90 cents each. The net cost of the transaction is reduced to just 13 cents per contract. Shares of the fund must rally at least 27% before the investor breaks even at a price of $23.13. The trader stands ready to accumulate maximum potential profits of 6.87 per contract if the stock surges up to $30.00 by January 2011.

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