Options Bull Bets On Bigger Gains for Gold This Year

One gold bug is targeting the December 30 call

by Emma Duncan

Published on Jun 20, 2019 at 3:33 PM

VanEck Vectors Gold Miners ETF (GDX) options are on fire today, with the exchange-traded fund's (ETF) calls flying off the shelves. The ETF was last seen up 3.7% at $24.90, and fresh off an annual high of $25.17, rallying alongside gold prices after the Fed's dovish comments yesterday, which has traders pricing in a July rate cut. GDX is now up 18% year-to-date, and options bulls are positioning for even more upside. 

Daily GDX Since June

Amid today's surge, GDX call volume is pacing in the 100th annual percentile. Currently, more than 311,000 calls have changed hands -- about five times the expected intraday amount. There's notable activity at the December 30 call, where buy-to-open activity has been spotted.

More specifically, it looks like a trader bought to open 20,000 December 30 calls for $0.52 each, translating into an initial cash outlay of $1.04 million (number of contracts * premium paid * 100 shares per contract). In this case, profit for the call buyer is theoretically unlimited on a move north of breakeven at $30.52 (strike plus premium paid), while losses are limited to the initial investment, should GDX be below the strike at December options expiration.

Today's heavy call-skew just echoes the longer-term trend seen in GDX's options pits. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), 197,697 calls were bought to open on the fund in the past four weeks, compared to just 85,257 puts.

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