As of the close of markets on April 21, 2011 the premium on the closed end fund PSLV was at 22% of net asset value. Why on earth would anyone pay that kind of premium for a silver ETF when they could buy SLV at almost no premium or physical silver at a few percent over spot?
That question has been the topic of several articles on Seeking Alpha and other financial sites. Most of them slam the high premium and conclude that people who buy PSLV despite the steep premium, are either conspiracy theorists or fools looking for a bigger fool to sell to. One article recommended going long SLV while shorting PSLV to play a kind of premium arbitrage game. (I don?t know why you need arbitrage when you can just buy silver and watch it go up.)
In this post I won't get into the validity of
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