Short-Term Gold Bug Raises the Stakes on Red-Hot JNUG

Volume on Direxion Daily Junior Gold Miners Index Bull 3x Shares (JNUG) call options hit an annual high today

Alex Eppstein
Jan 9, 2017 at 3:33 PM
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The Direxion Daily Junior Gold Miners Index Bull 3x Shares (JNUG) is soaring today, up 6.4% at $8.06, as gold rallies ahead this week's raft of Fed speeches and Donald Trump's Jan. 20 presidential inauguration. This has traders streaming into the exchange-traded fund's (ETF) options pits, with 38,489 JNUG calls on the tape -- triple the usual intraday rate, and fresh off an annual high.

The day's biggest trade occurred around noon, when matching blocks of 10,000 contracts cross at the weekly 1/13 7- and 9-strike calls. According to Trade-Alert, one bullish bettor is rolling her position up, selling to close the lower-strike calls and buying to open the higher -- anticipating JNUG will topple $9 by week's end, when the series expires.

Call buying has been all the rage of late. During the past two weeks at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), traders have bought to open 4.09 JNUG calls for every put -- a ratio that ranks in the elevated 89th annual percentile. As a result, the ETF's Schaeffer's put/call open interest ratio (SOIR) is down to 0.49 -- in the bottom quartile of its annual range, with short-term calls doubling puts.

Now is an expensive time to purchase premium on JNUG options in the front-month series, though. The shares sport a sky-high Schaeffer's Volatility Index (SVI) of 658%, outstripping all but 12% of readings recorded in the past year. In other words, lofty volatility expectations are currently being priced into short-term strikes.

Technically speaking, the Direxion Daily Junior Gold Miners Index Bull 3x Shares (JNUG) has fallen on hard times, relative to its August peak above $33 -- with the broader struggle in gold resulting in a dramatic sentiment shift for the malleable metal. However, JNUG has been making a comeback since consolidating around $4 in late December, and is on track for its fourth consecutive daily finish above its 40-day moving average.

Schaeffer's Expiration Week Countdown subscribers just made 165% GAINS on Direxion Daily Junior Gold Miners Index Bull 3x Shares (JNUG) calls! Sign up now for a trial subscription.


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