Option Traders Take Positions as Gold Rallies

SPDR Gold Trust ETF (GLD), Direxion Daily Gold Miners Bull 3X Shares (NUGT), and Direxion Daily Gold Miners Index Bear 3X Shares (DUST) are all making big moves today

Mar 4, 2016 at 11:37 AM
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Gold futures are on the rise today, as traders weigh the latest nonfarm payrolls report against interest-rate expectations from the Federal Reserve. The Federal Open Market Committee (FOMC) will hold its March policy-setting meeting in two weeks. At last check, April-dated gold futures were up 1.5% at $1,277 per ounce -- on track for a nearly 5% week-over-week gain. Gold's positive price action is being felt elsewhere, with the SPDR Gold Trust ETF (GLD), Direxion Daily Gold Miners Bull 3X Shares (NUGT), and Direxion Daily Gold Miners Index Bear 3X Shares (DUST) all making big moves -- and option traders are piling on.

The SPDR Gold Trust ETF (GLD), for example, has climbed 1% to $121.95 -- and is fresh off a new 52-week peak of $122.37. This only extends the exchange-traded fund's (ETF) solid 2016, with GLD sporting a 20% year-to-date advance.

In the options pits, while one speculative player banked a roughly $23 million profit yesterday when she closed half of her March 108-117 long call spread -- according to Trade-Alert -- call volume today is running at 1.2 times the average intraday pace. New positions are being initiated at the May 122 strike, although it looks like one trader may be opening the calls in conjunction with GLD's May 122 put as part of a long straddle position.

Direxion Daily Gold Miners Bull 3X Shares (NUGT), meanwhile, has popped 13% to $69.69 -- and is on track for its highest weekly close since early July. Year-to-date, NUGT has nearly tripled, adding more than 32% this week alone.

Options volume has exploded on NUGT today, with both calls and puts crossing the tape at two times what's typically seen at this point in the day. Eleventh-hour call players appear to be buying to open the weekly 3/4 72 strike, while put buyers are targeting the weekly 3/4 67 and 70 strikes -- all of which expire at tonight's close.

Elsewhere, Direxion Daily Gold Miners Index Bear 3X Shares (DUST) has plummeted 13% to $3.35 -- after earlier notching an all-time low of $3.22 -- and has found a place on the short-sale restricted list. Longer term, DUST has surrendered more than 91% since topping out at an annual high of $40 in early August.

Options traders, meanwhile, are scooping up calls at two times the average intraday pace -- with call volume on track to hit a new annual high. Call buying has been accelerated in recent weeks, per DUST's 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) call/put volume ratio of 8.28, in the 98th percentile of its 52-week range.

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