Triple-Leveraged Gold ETF JNUG Stays In the Spotlight as Safe Havens Gain Ground

Short interest on this mining-based exchange traded fund just hit a new record high

May 12, 2017 at 10:51 AM
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As the stock market started the day with a stumble, safe-haven assets caught a lift -- including gold futures, with spot gold trading up 0.5% at last check. Also on the upswing is the Direxion Daily Junior Gold Miners Index Bull 3X Shares (NYSEARCA:JNUG), with the leveraged ETF breaking out to an early advance in excess of 5% to trade at $18.62.

Today's pop has JNUG shares looking to log a daily close above their 20-day moving average, located at $18.72, for the first time since April 12. It's been a choppy year so far for the mining-focused fund; JNUG was up more than 133% year-to-date at its February highs, but fell to a new 52-week low of $13.72 just last week.

jnug daily price chart 0512

Options traders have recently been betting on JNUG to bounce, as evidenced by its 10-day call/put volume ratio of 12.08 across the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). This ratio outranks 99% of comparable readings over the past year, as traders have rarely bought to open calls at a faster pace relative to puts.

And investors have continued to plow capital into JNUG, even as the fund has retreated sharply from its Feb. 8 peak at $52.12. In the intervening months, reports net inflows of nearly $546 million.

That said, short selling has become an increasingly popular tactic on the ETF. Short interest spiked by more than 57% in the most recent reporting period, and now totals 12.94 million shares -- absolutely dwarfing the previous high-water mark around 7 million, set back in October 2015. With call buying and short selling both ramping up in tandem, it's possible that some of the call volume is related to increased hedging activity on the part of shorts.

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