From Barron's Focus on Funds:
Exchange-traded funds that own shares of metals miners have been on a historically rocky ride in recent days, with huge rallies specked with big drops.
Wild swings in recent days have handed the Market Vectors Gold Miners ETF (GDX) its highest short-term historical volatility reading in at least two years, according to options data provider LiveVol. In plain English: the miner ETF hasn’t suffered trading this jarring in a long, long time.
GDX has bounced around in fitful bursts–up 3.7%, up 8.3%, down 6.4%, up 4.4%–since plunging last week to near an all-time low. Barron’s wrote at the time that extreme selling was prompting some technicians to call the bottom. On Tuesday, GDX was the most heavily ETF on the market, surpassing even the mighty SPDR S&P 500 (SPY) in the number of shares traded.
Looking ahead, the options market shows that traders see little chance that volatility will subside soon. So-called implied volatility of the Market Vectors Junior Gold Miners ETF (GDXJ) is sitting near its two-year high, data from LiveVol show. Implied volatility is a measure of how much investors will pay to use options as insurance against additional declines....MORE
