Silver Wheaton Options: Rich in Premium but Risky
Richard Bloch submits:I had this bright idea. If I owned SLV (which I do) and wanted to sell calls to generate income, why not sell calls on Silver Wheaton (SLW) instead? It’s not that I’m bearish on SLW, but that the implied volatility for this stock is way higher than for SLV. Here’s a look:
(Click chart to expand) Over the past year, the implied volatility for SLV rarely exceeded 40% to 45%. For Silver Wheaton, implied volatility rarely got that low. How does that translate into dollars and cents? As of the close on April 18, with SLW at 41.59, I could sell the June SLW 50 calls for around $114 per contract less commissions. Or with SLV at 42.42 I could sell the June SLV 50 calls for $60 per contract. That’s a pretty big difference, but technically speaking, selling SLW calls against SLV creates a naked short call positionComplete Story »
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