Ominous Options Activity in Gold Miners ETF
Shares of the downtrodden Market Vectors Gold Miners ETF (NYSE: GDX) are down 3.4 percent Tuesday, extending the ETF's 90-day loss to 33.6 percent, and some traders are betting things could get worse for GDX.
Citing a note from Interactive Brokers, Barron's reports nearly 40,000 June $27 puts on GDX have changed hands today compared to open interest of 16,819 contracts.
"It looks like the bulk of the volume was purchased for an average premium of $0.89 per contract. Put buyers stand ready to profit at June expiration should the price of the underlying plunge 9.5%," according to the Interactive Brokers note. The note appeared in the Barron's Focus on Funds column in today's online edition.
GDX was a holding at the end of the fourth quarter for hedge fund luminaries including David Einhorn and George Soros. That has not prevented the ETF from performing noticeably worse than gold itself.
The last time GDX outperformed the SPDR Gold Shares (NYSE: GLD), which is backed by physical gold, on a yearly basis was 2010. In the past year while GLD is down 11.5 percent, GDX has plunged 34.2 percent.
Options traders do not appear too enthused by the prospects for the Market Vectors Junior Gold Miners ETF (NYSE: GDXJ), either. Volume in the GDXJ June $12 puts is 720 contracts today compared to open interest of 867 contracts, according to Options Monster data. That ETF has lost almost 45 percent in the past year.
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