With a fork or clean hands, gently combine the meat, egg, bread crumbs, salt, and pepper. Shape into 1-inch balls. Press a green olive slice into the ball to make "eyes". Melt the butter in a large saute pan and brown the meatballs on all sides.
Drain off the fat. In a bowl, stir together the jelly and chili sauce and pour over the meatballs. Simmer uncovered for 30 minutes over medium to low heat, turning the meatballs regularly.
