Anti-Silver Bets Keep Rising Into Price Inflection Point (SLV, SIL, AGQ, HL, GLD)

By now you have likely heard the term “The Devil’s Metal.”  When you see big price whips in silver, it generally means that there is something happening in commodity markets.  The situation which makes this so volatile is that silver is often the poor man’s gold trade.  The options trading was through the roof today, and it was skewed to the PUT options.

All you have to do is to look at the iShares Silver Trust (AMEX: SLV) closed down 4.2% at $26.12 on the day on a 50% upside of trading volume with some 21.7 million shares trading hands.  The 52-week range is $25.65 to $42.78.  The real interest was in the PUT options, implying that investors are putting on more and more bets against the devil’s metal. We saw more than 100,000 Put options trade hands this Thursday with about 40,000 of those taking place in the front-month July expiration. That is almost triple the normal volume in options and it is interesting that it is happening this close to 52-week lows.

The move in the Global X Silver Miners ETF (AMEX: SIL) was even more severe with a 6.7% drop to $18.68. ProShares Ultra Silver (AMEX: AGQ) trades at 200% of the daily move of silver and that ETF fell by 8.1% to $36.74 on a 160% volume spike of 2.7 million shares.

Hecla Mining Co. (NYSE: HL) was down a sharp 7.2% to $4.51 and the lower silver prices may hamper its ability to turn back around as fast as it had hoped.

With the iShares Silver Trust (AMEX: SLV) down 4.2% at $26.12, the way to compare the volatility is to see that gold via the SPDR Gold Shares (AMEX: GLD) as it fell by “only” 2.5% at $152.01.

With silver now close to a 52-week low and with the bets growing for even more weakness, we would note that this is usually the sign of a key inflection point being very near.  That does not necessarily mean that silver is going to bounce, but if it trades much lower from here then it may take the hot air out of the devil’s metal for quite some time.

JON C. OGG