One investor wants to be long gold miners and crafted an unusual
bullish strategy in the Market Vectors Gold Miners Fund today.
optionMONSTER's Heat Seeker tracking system detected the sale of
10,000 GDX January 52 puts for $2.82 and, seconds later, the
purchase of 10,000 March 62 calls for $1.88. Volume was more than 5
times open interest at each strike, indicating new activity.
The GDX is up 2.64 percent to $54.11 in afternoon trading. The
exchange-traded fund hit multi-year lows over the summer but has
rallied 16 percent in the last three months as physical bullion
advances. Its largest holdings include Barrick Gold, Goldcorp, and
Today's option trade resulted in a credit of $0.94 and offers
several ways to make money. One is that the GDX simply rallies, in
which case the
will lose value and the
Alternatively, a near-term pullback could lead the trader to buy
shares for $52. He or she would then remain leveraged to a
subsequent rally with the longer-dated March calls in addition to
Finally, if the fund simply moves sideways, the trader will keep
the credit as a profit as the options expire worthless. The main
risk is to the downside because they will lose money on the short
puts if GDX suffers a big drop.
The strategy was unusual because it involves contracts with
different expiration months, and because the puts are much closer
to the money than the calls. Overalls, it reflects a long-term
bullish view, but uncertainty as to when the rally will take place.
More than 76,500 contracts have traded in GDX so far today,
compared with about 56,000 in an average session.
Copyright © 2010 OptionMonster® Holdings, Inc. All Rights Reserved.