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Traders Nail The Silver ETF Trade

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November 12, 2015 1:35 pm
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Traders Nail The Silver ETF Trade

Twenty exchange traded funds hit 52-week lows Wednesday and in a telling sign about the impact expectation of higher interest rates are having on some asset classes, six of those offending funds were commodities products.

 

Perhaps surprisingly, no dedicated silver ETFs joined 52-week low club yesterday, though that dubious distinction might not be far off. The iShares Silver Trust (NYSE: SLV), the world's largest ETF backed by physical holdings of silver, and the ETFS Physical Silver Shares (NYSE: SIVR) are each down 10 percent over the past month. The not so fun fact being thrown around about SLV is that Wednesday represented that ETF's 10th consecutive losing session.

 

As Barron's notes, that is the longest losing streak in SLV's history. The $4.5 billion ETF debuted in April 2006.

 

As Benzinga reported earlier this week regarding gold, and the same holds true for silver, if higher rates come to pass, Treasury yields will begin reflecting that before the Fed makes it official. Along the way, the U.S. dollar will likely rise and commodities, including gold, are denominated in dollars. That means a stronger dollar, as has already been proven, is not a good thing for bullion-backed and gold mining ETFs. 

 

No pun intended, but there is a silver lining. That being that flows data have proven to be accurate harbingers of silver's recent fate and traders are getting it right with inverse, leveraged silver ETFs, something that is not always the case with leveraged gold miners ETFs

 

Since the start of the current quarter, SLV and SIVR have bled $71.4 million and $3.1 million, respectively, in assets. Conversely, traders have warmed to bearish leveraged equivalents, including the ProShares UltraShort Silver (NYSE: ZSL).

 

That faith has been rewarded. ZSL, which undergoes a 2-for-1 split today, attempts to deliver double the daily inverse performance of silver prices at the London fix. While SLV is on a 10-day losing streak, ZSL has surged nearly 25 percent over the same period. During the fourth quarter, the double-leveraged silver bear fund has added nearly $20.4 million in new assets.

 

For the trader thirsting for some more juice, ZSL has a triple-leveraged rival in the form of the VelocityShares 3x Inverse Silver ETN (NYSE: DSLV). The VelocityShares 3x Inverse Silver ETN attempts to deliver triple the daily inverse performance of the S&P GSCI® Silver Index Excess Return.

 

DSLV has returned a tidy 38.9 percent over the past 10 trading sessions and has raked in nearly $12.6 million in new assets this quarter.


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