OptionsHouse

Options Trading News

October 4, 2012  Thu 12:22 PM CT

GDX: SEE CHART GET CHAIN FIND STRATEGIES
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 Newmont Mining.

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 short puts will lose value and the long calls will appreciate.

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 the equity.

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. (See our Education section)

More than 76,500 contracts have traded in GDX so far today, compared with about 56,000 in an average session.
Share this article with your friends


Related Stories

GDX

Big trade sticks with gold miners

August 7, 2015

A large investor is looking for a quick pop in the Market Vectors Gold Miners Fund, which has lost half its market valuation in the last year.

Invest Like a Monster - San Antonio: October 9-10

Premium Services

Archived Webinar

Education & Strategy

Options Academy: On Options Strategies in General

Before we hop into the different option strategies, I have a few thoughts for you to remember concerning the strategies and our use of them.

View more education articles »