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Some big moves in today’s options trading make it appear that investors are banking on...

Some big moves in today’s options trading make it appear that investors are banking on another drop in the gold miners ETF (GDX -3%), already -36% YTD. Volume in GDX options is heaviest in the June $27 strike puts, where nearly 40K puts have traded vs. open interest of ~16K contracts. Big miners are broadly lower: HMY -5.5%, GFI -5.2%, AU -3.2%, ABX -3.1%, EGO -2.8%, NEM -2.2%, GG -2%.
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Comments (3)
  • TwistTie
    , contributor
    Comments (2476) | Send Message
     
    How can you tell if the option activity is bullish or bearish?

     

    What does it mean when the trading activity is so much higher than the open interest?
    7 May 2013, 02:30 PM Reply Like
  • Gold Theory
    , contributor
    Comments (14) | Send Message
     
    TwisTie: They are "puts" (the right to sell at the "strike" on the expiry date). So this is a bet that gdx will fall by more then $2 by June expiry. FYI a contract is 100 shares, so 40k contracts is 4 million shares... Open interest is how many contracts have been bought, so tomorrow open interest will be 56k or so (40k + 16K). At face value this is bearish but of course someone is on the other side of this trade too (someone wrote/sold the option and is now sitting on a pile of cash which they will get to keep as long as gdx doesn't go under $27 by June... if the writer is wrong they will have to buy 4 million shares for $27 even if GDX is trading at $20).
    7 May 2013, 03:42 PM Reply Like
  • TDWelander
    , contributor
    Comments (639) | Send Message
     
    Response and request to Mr Gold Theory.

     

    I hate headaches. You must not have anything better to do. And having a life does not appear to be on your list either. When I was in graduate school, I tried tracking your kind of crap.

     

    It was a headache back then too and left me wondering too often.
    Just too damn many permutations to keep track of. Or a really easy way to outsmart yourself.

     

    So what is your secret? How do you sleep at night with all these variables floating around in your head. Have you come up with some kind of real time spread sheet to minimize the tracking headache? Or do you just like on going headaches? I guess that would make you a masochist.

     

    Any functional and real advice on how you keep track and juggle this info, especially with real time trades would be appreciated.
    Or are you just a neophyte trying to be clever?

     

    I presume you limit yourself in some way to keep your sanity.
    Which means getting you to supply your market operating plan I presume would be asking too much. Once the hedge fund sharks know how you operate, they are right there one step ahead of you to steal from you.

     

    It is probably realistic to ask, if I have missed something, please advise.
    7 May 2013, 04:04 PM Reply Like
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