As Silver ETFs Soar, Options Activity Turns Brisk

Investors have previously turned to silver exchange traded funds as an asset with a safe store of value and as a metal with wide industrial application in a growing economy. However, the precious metal is now suffering from a bad turn on both fronts. That means heading into 2016 silver ETF investors face a confounding set of circumstances.

Additionally, unlike gold, silver is used in many industrial applications, but industrial demand is diminishing as global growth, notably China, begins to slow. Industrial demand for silver dipped 0.5% last year on lower demand from Europe and North America.

“Taking a step back, options buyers have been gravitating toward calls over puts in recent weeks. SLV’s 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) call/put volume ratio of 4.24 outstrips three-quarters of readings from the past year — with long calls besting puts by a more than 4-to-1 margin,” adds Schaeffer’s.

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