Market Vectors Gold Miners ETF (GDX) and the $600K Options Bet

One options trader bought to open more than 21,000 Market Vectors Gold Miners ETF (GDX) puts -- but why?

Jul 5, 2016 at 3:29 PM
facebook X logo linkedin

The Market Vectors Gold Miners ETF (GDX) is nearly 2% higher at $29.61 -- and fresh off a two-year high of $29.76 -- as the broad-market bloodbath sends traders racing for safe-haven investments like gold. However, GDX puts are crossing the tape at double the expected intraday rate, and are easily outpacing calls.

Most active by a mile is the August 24 put, where nearly 49,000 contracts have been exchanged. According to Trade-Alert, the biggest transaction centered on a sweep of 21,589 contracts bought to open for $0.29 apiece -- or a total of roughly $626,000 (premium paid * number of contracts * 100 shares per contract). Given gold's rapid ascent, buyers of this out-of-the-money strike are likely hedging their portfolios against an unexpected pullback in gold stocks. No matter the motive, the most the aforementioned trader has to lose is the initial premium paid, should GDX settle above $24 at August expiration.

Taking a quick step back, puts have been the options of choice lately at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). During the past 10 weeks, the exchange-traded fund (ETF) has racked up a put/call volume ratio of 1.35 -- just 12 percentage points from an annual high.

Likewise, the Market Vectors Gold Miners ETF (GDX) sports a Schaeffer's put/call open interest ratio (SOIR) of 1.17, with puts outstripping calls among options expiring in the next three months. Relative to the last year's worth of data, the current SOIR sits in the put-skewed 84th annual percentile.

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.



How to collect 1 dividend check every day for LIFE

Did you know you could collect 1 dividend check every day the market is open? You could also do it starting with just $605! For me, I'm collecting 70 dividend checks every quarter…which averages around 1.1 dividend checks every business day. There's no trading behind this... no penny stocks or high-risk investments. All you do is buy and hold and you're set. There's no set up required either. If you start buying the dividend stocks I show you today... you could collect 1 dividend per day starting as early as this week. Click here for all the details.