Options Traders Blast Booming GLD, NUGT, and SLV

SPDR Gold Trust ETF (GLD), the Direxion Shares Exchange Traded Fund Trust (NUGT), and the iShares Silver Trust ETF (SLV) are higher as traders flock to safe-have assets

Jul 6, 2016 at 10:18 AM
facebook twitter linkedin

fresh wave of "Brexit"-related anxiety is fueling a sell-off of stocks in the holiday-shortened week -- and sending traders flocking to so-called safe-haven assets. Specifically, precious metals gold and silver are getting a big boost -- with the former exploring two-year highs ahead of this afternoon's release of the June meeting minutes from the Federal Open Market Commitee (FOMC) -- as evidenced by the price action in the SPDR Gold Trust ETF (GLD), the Direxion Shares Exchange Traded Fund Trust (NUGT), and the iShares Silver Trust ETF (SLV). Options traders, meanwhile, have been racing toward GLD, NUGT, and SLV in recent weeks.

GLD is up 0.9% at $130.64 -- and fresh off a two-year high of $130.85. This is just more of the same for the exchange-traded fund (ETF), which has surged 30% since bottoming at a six-year low of $100.23 in mid-December -- one day after the Fed raised interest rates for the first time in a decade.

Options traders, meanwhile, have been initiating long SPDR Gold Trust ETF calls relative to puts at a rapid-fire rate in recent weeks. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the ETF's top-heavy 10-day call/put volume ratio of 3.02 rests higher than 86% of all comparable readings taken in the past year.

NUGT jumped to a new annual high of $163.81 out of the gate, but was last seen up 5% at $161.56. This is just more of the same for the gold ETF that's more doubled since taking a Fed-induced bounce off its 80-day moving average in late May. Longer term, NUGT has surged almost sevenfold year-to-date.

However, it appears a number of speculative players have been bracing for a pullback -- or perhaps protecting against one. At the ISE, CBOE, and PHLX, NUGT's 10-day put/call volume ratio of 0.98 sits just 12 percentage points from a 52-week peak, meaning puts have been bought to open relative to calls at a faster-than-usual clip.

Regardless, those purchasing the Direxion Shares Exchange Traded Fund Trust's near-term options are getting a good deal, considering its Schaeffer's Volatility Index (SVI) of 147% ranks in the 7th annual percentile. In other words, premium on the ETF's short-term options are pricing in relatively low volatility expectations at the moment.

Lastly, SLV is 0.2% higher at $19.02, after hitting a nearly two-year high of $19.08 yesterday. Widening the scope, the silver ETF has rallied 44% in 2016 -- and recently broke out above its 140-week moving average. This trendline has ushered SLV lower since February 2013, and contained the shares' late-April rally attempt.

Options bulls have been rushing toward iShares Silver Trust ETF amid this positive price action. Specifically, traders at the ISE, CBOE, and PHLX have bought to open 153,628 calls over the past two weeks, compared to 24,301 puts. What's more, the resultant call/put volume ratio of 6.32 ranks in the elevated 94th annual percentile. With short interest up 31.7% in the most recent two-week reporting period, though, some of this activity could be a result of shorts hedging against any additional upside risk.

Schaeffer's Expiration Week Countdown subscribers just made 100% GAINS on SPDR Gold Trust (GLD) puts! Sign up now for a trial subscription.

Stop leaving money on the table with the same old broken options trading approach...

There is no options strategy that more perfectly capitalizes during earnings season better than this simple call and put buying strategy. Perfect for aggressive traders looking to recover their suffering portfolios so far in 2022. With the simplest possible options strategy, Schaeffer's team with 100+ years of options trading excellence, target 200% gains on every single trade. So many trades are being beaten down by the market, but don't be one of them! Don't waste another second... join us right now before the next trade is released! 

Schaeffer's Daily Bulletin Offer


Special Offers from Schaeffer's Trading Partners