1) the mining stocks are highly leveraged plays on the commodity, a 1% drop in Au can cause a 5% drop in the miners.
2) looking at the option prints is only part of the story. We don't know if the trades are a directional bet, a hedge against common, a roll of a previously establish position etc.
Gold is up $13.30 (0.85%) at $1,586.3; the Market Vectors Gold Miners ETF is up 4.07% at $36.06.
From Phil's Stock World:
GDX - Market Vectors Gold Miners Index ETF – Trading traffic in call options on GDX is outpacing activity in puts on the ETF this morning, with shares in the Market Vectors Gold Minders Index ETF popping up 4.0% to $36.07 just before midday in New York. In contrast, the single-largest trade in GDX options established in the early going this morning protects against – or profits from – a significant pullback in the price of the underlying fund to the lowest levels since January of 2009. Shares in the ETF have declined steadily during the past six months, and are down roughly 35% since September of 2012. The sizable bearish bet, the purchase of 8,000 puts at the Dec. $30 strike for a premium of $1.32 per contract, makes money if shares in the ETF plunge 20% from the current price of $36.07 to settle below the effective breakeven point at $28.68 at expiration.Here's the one year chart on the ETF, I'm not seeing any dramatic change in direction coming but then again I'd have bet on the Nazi's in the Spring of 1940.
In the past the miners would lead the commodity but that doesn't seem to be as true now.
Last month one of our favorite blogs, Cassandra Does Tokyo, expressed a hankerin' for some miner love and I tried to (gently) poke fun at the trade:
Cassandra Likes Gold Miners (XAU; GDX; HUI)
Cassandra's fate was to foresee the future but have no one believe her....Here's Cassie after taking the dive into Vancouver- listed Canadian juniors:
She was also the second most beautiful woman in the world and deranged....
Cassandra by Evelyn De Morgan
(1898, London); Cassandra in front
of the burning city of Troy
at the peak of her insanity
Maybe not as gentle as I thought at the time.
