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DrContango

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  • NUGT: How To Prepare For Yet Another Reverse Split For The Leveraged Gold Miner ETF [View article]
    " In fact, buying pre-split (provided you believe gold and silver are on the mend), can be advantageous because even though your investment value doesn't change, a higher price does tend to attract more volume and more money."

    Chris:

    Thank you for informative review.

    But I must take issue with your comment above.

    NUGT is a derivative of a derivative. GDX is derived from the prices of a collection of gold miners. NUGT and DUST are derived from the value of GDX.

    NUGT trades at its intrinsic value.

    Only Direxion might care about volume in case it wishes to create new units. Volume is moot to the retail speculator with the exception that the bid/ask spread could expand if volume dries up. In my opinion...

    comment on options:

    Yes, there will be decreased volume on existing contracts AND no new contracts will be opened on the newly adjusted contracts. Most importantly, one will no longer to be able to leg into spreads against existing contracts.

    Existing contract holders might experience some angst and mathematical confusion, but their contracts will not lose value after the adjustment.

    Finally, if GDX experiences a straight line rise, NUGT's performance might be even greater than 3X.

    BUT if there is a great deal of oscillation of GDX during the next several months and in September GDX sits where it is at today, both NUGT and DUST will decay dramatically due to the magic of inverse and leveraged ETP decay!

    Cheers,

    Stu
    Jul 28, 2013. 06:00 AM | 1 Like Like |Link to Comment
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