This week, I posted about a silver pairs trade strategy to exploit a clear market arbitrage opportunity whereby the premium on a silver closed-end fund had gotten out of hand. In essence, by shorting the physical-back closed-end fund (PSLV) and going long the silver ETF (SLV) at the same time with equivalent funds, you could capture the difference in premium that occurs over time with no net outflows, save for commissions. I thought it would be instructive to revisit the outcome after a short period of time.
At the time of posting, the premium on PSLV was approaching 24% and by the end of trading Friday, the premium was a mere 21.3% (Sprott's NAV page). Therefore, one would expect that this strategy would have delivered about an 2.7% return in just a few short days. A quick comparison of the two ETFs overlapped at any charting site like Google Finance
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