The VanEck Vectors Gold Miners ETF (NYSEArca: GDX) and the VanEck Vectors Gold Miners ETF (NYSEArca: GDXJ), the two largest gold miners exchange traded funds, are surging and, not surprisingly, that is leading to some increased activity in leveraged gold miners ETFs.
Notably, there is plenty of enthusiasm for the Direxion Daily Junior Gold Miners Index Bull 3x Shares (NYSEArca: JNUG), the triple-leveraged answer to the popular GDXJ.
“As the Direxion Daily Junior Gold Miners Index Bull 3x Shares almost tripled in the past two months, the number of shares changing hands has surged nearly fourfold this year. That’s even as trading has dropped for an ETF tracking larger mining peers and for the SPDR Gold Shares, the largest bullion-backed fund. The boost in volume has also led to a jump in bullish options on the leveraged security, with more than two calls for each put,” reports Eddie Van Der Walt for Bloomberg.
The Direxion Daily Gold Miners Bull 3X Shares (NYSEArca: NUGT) is JNUG’s large-cap counterpart. NUGT is up almost 51% year-to-date compared to a gain of nearly 97% for JNUG.
Although many market participants still expect the U.S. central bank to boost borrowing costs multiple times this year, investors are renewing their affinity for gold ETFs early in 2017. In the face of a stronger dollar and speculation that the Federal Reserve could raise interest rates as many as three times this year, gold prices could move modestly higher with some help from emerging markets, namely China and India. However, the dollar has recently retreated in noticeable fashion, helping aid gold’s ascent along the way.
Regarding JNUG, “As the number of shares traded on the leveraged ETF surged to a daily average of 54 million this year, the volume of bullish options doubled to almost 19,700, compared with about 7,900 bearish contracts. At 1.6-to-1, the ratio of outstanding calls to puts on the fund is higher than for the VanEck Vectors Gold Miners ETF, data compiled by Bloomberg show,” according to Bloomberg.
ETF traders who are uncomfortable with the riskier 3x products can also track the miner space with a smaller 2x leverage. For example, the ProShares Ultra Gold Miners (NYSEArca: GDXX) and ProShares Ultra Junior Miners (NYSEArca: GDJJ) take the 2x or 200% daily performance of NYSE Arca Gold Miners Index and Market Vectors Global Junior Gold Miners Index, respectively.
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