Bulls continue to make gains in $GDX calls

The VanEck Vectors Gold Miners ETF (GDX) remained near multi-year highs today as the price of gold neared the $1,475 per ounce mark, handing big gains to bullish option traders.

On June 25, Investitute’s market scanners identified the purchase of 25,000 August $28 calls for $0.58, as part of a bullish spread and roll, with shares at $26.21. Open interest in the strike was only 16,647 contracts before the trade occurred, showing that it was a new position. Investitute co-founder Pete Najarian cited the unusual activity on CNBC’s “Halftime Report.”

Those calls traded for as much as $1.11 today, nearly double their purchase price. The stock rose 9.35% in the same time period, illustrating how quickly options can far outperform moves in their underlying shares.

This outperforming trade in the GDX follows another from June 5, as bullish activity in the precious metals space has continued to work.

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 0.24% to close at $28.67 today, just off a fresh 52-Week high of $29.01 printed yesterday. The exchange-traded fund, which tracks a basket of miners, has caught a significant bid as investors flock to precious metals as a hedge against volatile equities.