Potential Silver Trust (SLV) Trade Has $32.12 Breakeven

Posted: Wednesday, August 10, 2011 8:09 AM EDT
By: Market Intelligence Center Staff

Silver Trust (AMEX:SLV) closed Tuesday's winning trading session at $36.32. In the past year, the ETF has hit a 52-week low of $17.43 and 52-week high of $48.35. Silver Trust (SLV) has been showing support around $35.18 and resistance in the $38.04 range. Technical indicators for the ETF are Bearish. For a hedged play on Silver Trust (SLV), look at the Jan '12 $37.00 covered call for a net debit in the $32.12 area. That is also the break-even price for this trade. This covered call has a duration of 164 days, provides 11.56% downside protection and an assigned return rate of 15.19% for an annualized return rate of 33.81% (for comparison purposes only). A lower-cost hedged play for Silver Trust (SLV) would use a longer term call option in place of the covered call ETF purchase. To use this strategy look at going long the Silver Trust (SLV) Jan '13 $19.00 call and selling the Jan '12 $37.00 call for a total debit of $14.15. The trade has a lifespan of 164 days and would provide 8.73% downside protection and an assigned return rate of 27.21% for an annualized return rate of 61% (for comparison purposes only). Silver Trust (SLV) does not pay a distribution at this time. [THA-Seven Summits Research]