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UPDATE 1-Bears hit silver ETFs with metal down
* Speculators eye SLV calls banking on ETF recovery
* SLV protective put buyers seek to lock in profits
* Options activity heavy, 775K contracts traded in SLV
(New throughout, updates ETF prices, option volume)
By Doris Frankel
CHICAGO, April 26 (Reuters) - Silver-backed exchange-traded funds slipped on Tuesday as many investors took some profits off the table following a recent surge in the metal.
Silver was on course for its largest one-day fall in six weeks on Tuesday after touching a 31-year high in the previous session. For details, please see [ID:nLDE73P0XB].
"We are seeing investors taking profits on the metal after this incredible run-up which was fueled largely by speculators," said TD Ameritrade chief derivatives strategist Joe Kinahan.
"We often see this case in commodities where speculators will come in a bit late to the party looking for the trend to continue to be their friend," he said. "But the problem here is that silver was nearing all-time highs this week."
The iShares Silver Trust (SLV.P), the world's largest silver-backed exchange-traded fund fell 3.9 percent to $44.01 on Tuesday after hitting a 2011 high of $47 on Monday.
Options sentiment is mixed in the ETF. Speculators are looking at call options as a buying opportunity expecting the fund to rebound from its pullback. "We also see protective put buyers looking to lock in their profits from this great move in silver," Kinahan said.
The ETF saw heavy trading in its shares and options with 17 million shares changing hands and 775,000 options contracts trading by early Tuesday afternoon, according to options analytics firm Trade Alert.
Trading hit a record 34.93 million shares on Monday accompanied by the trading of 1.4 million option contracts, which was 3.8 times the average daily volume.
On Tuesday, spot silver XAG= fell as much as 4.9 percent to a session low of $44.63 an ounce, after hitting $49.31 on Monday, its highest since touching $49.48 in January 1980.
"Everyone has heard that silver is in a parabolic uptrend, but it now appears ready to take at least a respite to calm down a bit," wrote Larry McMillan, president of options research firm McMillan Analysis Corp, in a report. <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Investors flock to silver ETF options [nN25225308]
Silver technical outlook [nL3E7FP0WW]
TIMELINE-A brief history of silver [nL3E7CJ0DO]
Gold,silver ETFs holdings: link.reuters.com/sen29r
ANALYST VIEW-Silver charges ahead [nL3E7FI1AA]
One top trade is a May $35-$37 two-to-one put ratio spread which traded 10,000 times at 3 cents per spread. The trade might have been initiated by a shareholder to help hedge recent gains or it might be a bearish bet targeting $35 per share for the fund before May expiration, said WhatsTrading.com options strategist Frederic Ruffy.
The Global X Silver Miners ETF (SIL.P), a silver mining ETF, also dropped 2.55 percent to $27.83 as the price of silver fell. The ProShares UltraShort Silver ETF (ZSL.P) jumped 7.7 percent to $15.72 on Tuesday. This ETF seeks to double the inverse of the daily change in spot silver.
Expectations of tighter monetary policy may also dampen interest in silver. The Federal Reserve began a two-day meeting on Tuesday, and the U.S. central bank is expected to soon end its $600 billion bond-buying program.[ID:nLDE73P0XB]
(Reporting by Doris Frankel; Editing by Andrew Hay)
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