The $8.9 billion Market Vectors Gold Miners ETF (NYSEArca: GDX) was up 23% from its May 16 intraday low in early trading Wednesday.
The recent bounce in the long-suffering ETF has attracted bullish activity in the options market, according to reports. Contracts on ETFs can be traded just like individual stocks and indices.
GDX rose more than 1% to above $48 a share in morning action.
The gold miner ETF “drew some bullish option activity Tuesday as traders focus increasingly on precious metals,” says OptionMonster co-founder Jon Najarian.
He said total volume in the fund was almost 123,000 contracts, nearly twice its daily average.
“The latest volume surge occurred in the July 49 calls on the exchange traded fund, which tracks several leading gold producers. More than 13,000 of those options traded against previous open interest of 1,002 contracts, indicating that these were new positions,” Najarian wrote at TheStreet.
“Calls fix the price investors must pay for shares in the fund. They can provide significant leverage, doubling or tripling in price from a move of just 10% in the stock, but can also expire worthless if a rally doesn’t occur,” he explained.