Carter Worth And Mike Khouw's Silver ETF Trade

Carter Worth spoke on CNBC's Options Action about a contrarian bet on iShares Silver Trust (ETF) SLV. He thinks that the stock is oversold, after it lost 11.78 percent since mid April and he believes it could rebound and move higher.

Worth explained that silver is very volatile and he presented a 1 year chart, which shows that it often gets overbought when it moves up and oversold when it moves down. He added that prior to its higher close on Friday iShares Silver Trust (ETF) had 14 consecutive lower closes, which has never happened before.

Mike Khouw would use options to make a bullish trade. Specifically, he would buy the August 15.50/17 call spread for $0.50. The trade breaks even at $16 or 3.23 percent above the closing price on Friday. It can maximally make a profit of $1.