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September 29, 2014 Mon 12:21 PM CT
Is it time for gold miners to rebound?
David Russell | david.russell@optionmonster.com
optionMONSTER’s Heat Seeker monitoring program detected the purchase of almost 21,000 Weekly 23 calls in the Market Vectors Gold Miners
GDX: SEE CHART GET CHAIN FIND STRATEGIES
tradeMONSTER
Gold miners have gotten slammed, but traders are looking for a rebound.
optionMONSTER’s Heat Seeker monitoring program detected the purchase of almost 21,000 Weekly 23 calls in the Market Vectors Gold Miners exchange-traded fund, most of which priced for $0.10. Volume was almost 13 times the previous open interest in the strike, which indicates new money was put to work.
These long calls lock in the price where investors can buy stock in the GDX, letting them bet on a rally by Friday’s close at limited cost. They have a lot less risk than buying shares outright because only the options’ premium can be lost o a downturn. The traders also stand to earn significant leverage if the fund pushes higher.
GDX is off 0.36 percent to $21.90 in afternoon trading and down 18 percent in the last month. That makes it the second-worst performer of almost 50 exchange-traded funds tracked by our proprietary researchLAB market scanner over the same period. Only the Global X Silver Miners (SIL) fared worse.
Precious metals have fallen sharply as inflation slows and the U.S. dollar appreciates against most currencies. Today’s bullish activity in GDX is probably tied to hopes of a rebound in gold and silver after the European Central Bank’s big policy announcement Thursday morning. (See researchLAB’s interactive calendar for a complete rundown of potential market catalysts.)
The exchange-traded fund’s main holdings include Goldcorp, Barrick