Direxion Daily Gold Miners Index Bear 3X Shares (DUST) Options Traders Eye Extended Gains

The Direxion Daily Gold Miners Index Bear 3X Shares (DUST) is fresh off a record low

by Alex Eppstein

Published on Jun 6, 2016 at 3:15 PM

Another speech from Fed Chair Janet Yellen has thrust gold back into the spotlight. This time, the head of the central bank warned against overreacting to Friday's nonfarm payrolls report. Gold briefly dipped during the more-hawkish-than-expected remarks, but June-dated futures were last seen 0.3% higher at $1,246.80 per ounce. Amid the choppy trading, the Direxion Daily Gold Miners Index Bear 3X Shares (DUST) is edging higher, and the exchange-traded fund's (ETF) options have gained traction.

At last check, DUST was 0.1% higher at $11.03. However, the shares have fallen hard in 2016 -- currently sitting on a 93.3% year-to-date deficit -- and they earlier touched a record low of $10.88. In recent weeks, the ETF's 30-day moving average has curbed any and all breakout attempts, as well.

Last Friday, in fact, DUST tumbled over 33% and landed on the short-sale restricted list, as gold staged a major rally. The shares remain unavailable to short sellers today, too -- though they're heavily shorted, overall. Specifically, short interest exploded over 1,100% during the last two reporting periods to 21.5 million shares.

Meanwhile, the ETF's call options are crossing at a slightly accelerated rate this afternoon, with buy-to-open activity detected at the out-of-the-money June 14 strike. In short, the call buyers foresee the shares taking back $14 -- a perch given up last Friday -- by the close on Friday, June 17, when front-month options expire.

This is business as usual for DUST speculators. During the last 10 weeks at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), traders have bought to open 20.59 calls for each put on the Direxion Daily Gold Miners Index Bear 3X Shares (DUST) -- a ratio that ranks in the high 92nd percentile of its annual range.

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