$GDX call prices triple

The VanEck Vectors Gold Miners ETF (GDX) rose today as gold prices continued their rally to nearly $1,400 an ounce.

On June 5, Investitute’s market scanners identified the purchase of 26,000 July $24 calls from $0.40 to $0.44, as part of a bullish spread, with shares at $22.83. Open interest in the strike was only 9,928 contracts before the trade occurred, showing that it was a new position. Investitute co-founder Jon Najarian cited the unusual activity on CNBC’s “Halftime Report.”

New purchasers of those calls paid as much as $1.48 today, more than triple their average purchase price. The stock rose 10.21% in the same time period, illustrating how quickly options can far outperform moves in their underlying shares.

Long calls lock in the price where investors can buy a stock, letting them position for a rally at limited cost with the potential for significant leverage. They carry less risk than owning shares because the most that can be lost is the price of the options no matter how far the stock might fall.

GDX was up 4.37% to close at $25.05 today. The exchange-traded fund, which tracks a basket of miners, including Pan American Silver, caught a significant bid as investors flocked to precious metals as a hedge against a declining U.S. Dollar.