Options Trading News

November 5, 2012  Mon 11:45 AM CT

The Market Vectors Gold Miners Fund fell sharply last week with the price of the precious metal, and one trader sees more volatility in the next few days.

The GDX is off 0.32 percent to $49.60 in afternoon trading, continuing the slide that began last week, and is now on pace for its lowest close since Sept. 10. The exchange-traded fund peaked just shy of $53 on Wednesday but gapped below $50 on Friday.

More than 5,000 Weekly 50.50 calls traded today, with a block of 4,043 going for the bid price of $0.57, according to optionMONSTER's tracking systems. This is a clearly new position, as the strike's open interest was just 314 contracts at the start of the day.

The calls appear to have been traded against GDX stock. The two biggest blocks of shares traded one second after the option activity, with prints of 92,150 and 61,484 both going for $49.7368.

So the overall strategy seems to be looking for more volatility in the coming days. The implied volatility of the calls is 38 percent, while the 10-day historical volatility for the GDX shares is 41 percent. (See our Education section)
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As I stated in last week's article, a break out or a break down needs to have a couple things happen before it is considered a confirmed break out or break down. The only problem is that in today's market where things move much more quicker than they did just a few years ago, two days could wind up being the majority of the expected movement, if not the whole movement.

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