It May Be Time To Sell Some Cash-Secured Puts On SLV

May. 8.12 | About: iShares Silver (SLV)

The iShares Silver Trust (NYSEARCA:SLV) has been range-bound since October 2011, trading between $27 to $34. After having some wild swings in the whole of 2011, it looks like SLV may have temporarily found some support at the $30 level.

For investors with some additional capital sitting in their brokerage accounts, it may not be a bad idea to write some cash-secured puts at this point on SLV.

I've set up my Google Spreadsheet to automatically pull in options data from various sources on the web. This allows me to easily determine the bid-ask price, volume, and open interest for any options contracts that's listed.

Below I've shown several put options for SLV with varying strike prices expiring in May 2012 and June 2012. You can see the annualized time value, bid-ask spread, and effective entry price, should the options be exercised. In the money options are shaded in yellow.

Click to enlarge

The 1 month and 2 month historical volatilities have been 19.22 and 25.44 for SLV, respectively. However, the implied volatilities of several of the May and June options exceed this, fetching from 27 to 30. This may be a good time to sell some options and collect some juicy premiums.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in SLV over the next 72 hours.