$GDX call prices double in hours

The VanEck Vectors Gold Miners ETF rallied today as gold prices soared back above $1,220 an ounce.

Just this morning, Investitute’s market scanners identified the purchase of 22,000 November $20.50 calls from $0.21 to $0.28 with shares at $18.98. Open interest in the strike was only 4,809 contracts before the trade occurred, showing that it was a new position.

New purchasers of those calls paid as much as $0.55 this afternoon, double their average purchase price. The stock rose 5.06% 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 6.55%, just off its session high, to close at $19.87 today. The exchange-traded fund, which tracks a basket of precious metals miners, had its biggest rally in years today as investors flocked to gold as a hedge against equity volatility, driving outlooks for its prospectors higher.