Silver ETF -- Beware The Opening Tracking Gap (SLV, CEF)

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Includes: CEF, SLV
by: David Fry

Everyone’s waiting for the Silver ETF (NYSEARCA:SLV) which was approved by the SEC yesterday and scheduled to launch today.

Many investors aren’t aware that each share represents 10 ounces of silver. If the price of silver is around $12.50, then each share should be priced around $125.00. I think many investors assumed they’d be buying SLV at $12.50 per share. This high price-per-share fact could dampen retail interest. It shouldn’t matter that much since silver is silver. But most retail investors don’t like such high prices.

The opening could feature a wide tracking gap, since buy orders could overwhelm the ability of the market to mix and match silver shares with silver. Investors wishing not to be disadvantaged may want to wait out the first few hours of trading to see how SLV tracks the underlying metal. Nevertheless, it will be interesting.