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Wednesday, February 21, 2024

Gold and silver ETFs shine as dollar declines

Today’s tickers: GLD, SLV, SHLD, NTAP & DOW

GLD– Shares of the gold ETF have climbed less than 1% to $94.19 amid a rise in oil and metals prices. One trade of interest on the fund was the work of an investor who is likely long shares of GLD. The trader sold 5,000 calls at the July 100 strike price for a premium of 2.15 apiece and also sold 10,000 calls at the higher July 107 strike for a dollar each. Perhaps the transactions represent covered calls. If this is the case, the investor enjoys the premiums granted for writing the options and establishes effective exit positions. About one-third of his shares will be called away from him at expiration if the July 100 calls land in-the-money by expiration with the remaining shares called from him in the event that the July 107 calls land in-the-money. The Gold ETF would need to rally by as much as 14% in order for the July 107 calls to expire in-the-money. – SPDR Gold Trust ETF

SLV– The silver ETF took up residence on our ‘most active by options volume’ market scanner this morning after investors targeted the January 2010 contract looking for further bullish movement in the fund. Shares of the SLV are currently higher by more than 1% to $14.53. Yesterday we observed a trader who is expecting either a silver-bonanza or a silver-bust as he established a 20,000 lot bought-strangle in the same January 2010 contract for a net cost of 1.32. In contrast, today’s traders have positioned themselves to benefit solely from gains in the silver-sector. At the January 17 strike price more than 5,200 calls were purchased for an average premium of 1.13 each. These optimists will begin to see profits if shares rally by approximately 25% from the current price to the breakeven point at $18.13 by expiration in eight months. – iShares Silver Trust ETF

SHLD– Shares of the largest U.S. department-store chain have surged by more than 16.5% to $58.50 after reporting unexpected first-quarter profits. Earnings of 38 cents per share must have come as quite a surprise to analysts who had previously forecast a loss of 87 cents for the firm. Profits for the quarter were aided by reductions in advertising combined with cuts in payroll expenses. Despite the bullish news, investors could not shake the overall picture of SHLD which is far less rosy. Revenue fell more than 9% to $10.1 billion amid a 7.4% decline in same-store sales open at least one year. Same-store sales have eroded every quarter since SHLD’s Chairman, Edward Lampert, merged Sears and Kmart in 2005. Option trades on the stock were more bearish than bullish as investors were observed selling calls in the June contract. Likely initiated to bank gains on today’s rally, traders shed 1,000 calls at the June 60 strike price for 3.38 each and another 2,000 at the higher June 65 strike for 1.69 apiece. Perhaps these individuals see shares remaining below the strike prices described thus allowing them to retain the full premiums enjoyed on the sales. The June 50 strike price saw 1,000 puts purchased for 1.19 each while the June 55 strike price had 1,600 puts sold for a premium of 2.61 per contract. Option implied volatility on the stock dropped as low as 56% this morning down from 71% yesterday, although volatility has since risen to the current value of 61%. – Sears Holdings Corporation

NTAP – The data storage company continues to enjoy a modest rally of less than 1% to $17.92 after confirming its acquisition of rival Data Domain (DDUP) yesterday. One investor expecting further upside gains in NTAP was observed adding to a bullish position in the December contract. It appears that this individual has doubled his previous position by selling 3,500 puts at the December 14 strike price for 1.00 apiece and by purchasing 3,500 calls at the December 19 strike price for a premium of 2.10 each. The optimistic trade cost the investor a net 1.10 for the transaction. Yesterday the same strike prices were selected, the puts yielded just 95 cents per contract and the calls were a nickel cheaper at 2.05 each, but the net cost of the transaction of 1.10 was the same. The trader will begin to profit if shares rally 12% to the breakeven point at $20.10 by expiration at the conclusion of 2009. – NetApp, Inc.

DOW– The manufacturer and seller of chemicals and plastic materials edged onto our ‘most active by options volume’ market scanner after some bullish trades were executed on the stock. Shares are currently up slightly by less than 1% to stand at $17.22. The December 19 strike price had 1,000 calls coveted for a premium of 2.40 apiece while the higher December 25 strike price had more than 2,200 calls scooped up for about 92 cents per contract. Shares must rally 24% before traders long of December 19 calls begin to amass profits at the breakeven price of $21.40. More significant gains of approximately 50% from the current price would ensure profits for investors long of December 25 calls beginning at a breakeven price of $25.92 by expiration. – The Dow Chemical Company

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