Put Players Pile On The Outperforming Market Vectors Gold Miners ETF (GDX)

The Market Vectors Gold Miners ETF (GDX) has made huge gains this year, but put players continue to dominate in the options pits

by Kirra Fedyszyn

Published on May 11, 2016 at 3:24 PM
Updated on Jun 24, 2020 at 10:16 AM

The Market Vectors Gold Miners ETF (GDX) is up 2.3% at $24.95 today, as June-dated gold recovers from yesterday's two-week low. The malleable metal has been on the rise this year, with spot gold hitting an annual intraday high of $1,304.40 an ounce at the beginning of May. With the rally in gold, GDX has been climbing higher for months, but that hasn't stopped it from becoming the target of unusually bearish attention in the options pits.

Put players have been piling onto GDX lately, and put open interest is already seated at the peak of its 12-month range. Also, the ETF holds a 50-day put/call volume ratio of 1.18 on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) -- higher than 99% of all readings taken in the past year. Echoing this is GDX's Schaeffer's put/call open interest ratio (SOIR) of 1.50 -- in the 97th percentile of its annual range. That means short-term traders have been exceptionally put-skewed toward the ETF recently.

T
oday is no exception -- with the contracts changing hands at 1.5 times the rate of calls. In fact, GDX's three most active strikes are puts. The top spot belongs to the May 22.50 strike, where nearly 12,000 contracts have crossed the tape, and it looks like some positions are being bought to open -- confirmed by data from the ISE. There is also likely buy-to-open action occurring at the June 20 and weekly 5/27 23-strike puts.

Considering the GDX's strong technical performance, it's possible that at least some of these put players are not true bears. They may, in fact, be shareholders using protective puts to hedge against downside risk.

Outside of the options pits, short interest has been on the rise -- up 57% during the two most recent reporting periods. But these pessimistic bets still account for less than a single session worth of trading, at GDX's average daily volume.

On the charts, GDX has put in an outstanding performance, adding nearly 82% in 2016 and recently bouncing off of support at its 20-day moving average, which has ushered the shares higher for more than two months. Also, as recently as May 2, the equity touched an annual high of $26.17. If bearish options traders begin to abandon their positions, the Market Vectors Gold Miners ETF (GDX) could be poised to see even larger gains.

Perhaps unsurprisingly, precious metals make up one of the strongest sectors at the moment. According to data compiled by Schaeffer's Senior Quantitative Analyst Rocky White, all 23 stocks we cover within the sector are above their 80-day moving averages, and the average year-to-date return is an astounding 106%. In fact, several gold stocks are getting further boosts from upbeat analyst attention today.

Sign up now for Schaeffer's Market Recap to get all the day's big stock movers, must-know technical levels, and top economic stories straight to your inbox.


A Schaeffer's 39th Anniversary Exclusive!

8 Top Stock Picks for 2020

Access your FREE insider report before it's too late!


  
 
 

Partnercenter