Yesterday’s trading session in the iShares Silver Trust ETF (NYSE: SLV) was noteworthy for multiple reasons. First, it experienced a 5.5% intraday trading range — an up tick in realized volatility for an already volatile name. Second, the surge in demand from options trading investors which began last Thursday continued with gusto during Monday’s session as implied volatility (IV) rose to levels not seen in five and a half months. That’s the gold line in the graphic below. And third, SLV set a new record in trading volume as over 189 million shares changed hands.

Volatility in iShares Silver Trust (NYSE: SLV)

So what’s it all mean? Well, from a volatility standpoint it means option sellers are able to garner more premium today than was available last week. Stock owners often use this as an opportunity to sell covered calls to capture the additional risk premium pumped into option values. Owners of the SLV exchange-traded fund seeking to reduce their directional exposure as well as exploit the high implied volatility may consider selling the SLV May 45 or 46 Call. 

It’s always interesting to see a high-volume trading session after a stock or ETF has risen multiple days. Oftentimes high volume after a multi-day directional move is a sign of exhaustion — the final gasp of the surge. Such has been the case over the past two months in SLV. The following chart highlights that the last four short-term highs in SLV are all marked with high volume trading sessions. While we can comfortably state SLV has formed yet another short term top it is entirely too early to determine if the uptrend is dead.

Shining Silver & the Four Tops

(Source:  MachTrader)

At the time of this writing Tyler Craig had no positions in SLV.

Follow Tyler Craig on Twitter@TylersTrading.