Optimism over Goldman’s bullish call on bullion has pushed the SPDR Gold Shares ETF (NYSEARCA:GLD) up 0.7% to $128.45. Meanwhile, the VanEck Vectors Gold Miners ETF (NYSEARCA:GDX) has rallied 1.7% to $22.48, and one options trader today sold premium into the rally.
Shortly after 1:00 PM Eastern, per International Securities Exchange (ISE) data via Trade-Alert, a short straddlewas opened on GDX at the January 2019 22 strike. The trader sold 5,000 of the LEAPS calls for $2.58 per contract, and 5,000 of the corresponding puts for $1.79 each. The total net credit on the position is $4.37 for each put/call pair — which, after accounting for 100 shares per contract and 5,000 straddles sold, shakes out to $2.185 million.
Given that the ISE flags these trades as firm-generated, this isn’t necessarily a speculative play on gold miners. In fact, 110,000 GDX shares traded at roughly the same time for $22.44 each, and the transaction appears tied to the short straddles.
For what it’s worth, at-the-money implied volatility on the GDX weekly 3/29 strike has jumped 4.7 percentage points today to 29.33%. After this week’s expiration, volatilities drop back into the 24-25% range, but gradually rise to 27.63% by the aforementioned January 2019 series. Unlike equity volatility, gold option volatility has historically increased on rallies in gold prices — so it would seem the options market is, like Goldman, pricing in a bullish long-term forecast for the precious metals sector.
On the charts, GDX topped out at $22.50 earlier — right in the neighborhood of a recently completed bearish cross by its 50-day and 80-day moving averages.
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