Range-bound strategy in silver fund

optionMONSTER

A trader is looking for the iShares Silver Fund to remain range-bound after its free-fall earlier this week.

optionMONSTER systems show that the June 22.50 calls and puts each traded 6,600 contracts yesterday for $1.14 and $1.17 respectively. The volume at each strike was more than twice the previous open interest, so this is a new combination trade.

Both the calls and puts appear to have been sold in a short-straddle position, which would take in a profit of about $2.31 around that $22.50 level. The trade is designed to profit from range-bound trading and/or from actual volatility that is less than that implied by those options. (See our Education section)

The SLV was down 0.99 percent to $22.44, just above Monday's low and at its lowest levels since October 2010. The exchange-traded fund has fallen from $27 a week ago as the price of silver and gold has plummeted.

More than 254,000 SLV options traded yesterday, compared to the daily average of 116,000 in the last month. 

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