$GDX calls fly as gold shines

Bullish option traders have almost tripled their money in the VanEck Vectors Gold Miners Fund (GDX).

Back on March 8, Investitute’s proprietary programs flagged the purchase of 4,200 July $20 calls for $2.88 to $2.90 with shares at $22.31. This was cleraly fresh buying, as open interest in the strike was a mere 93 contracts before that session began.

Those calls traded for as much as $8 today, almost 3 times their purchase prices. The stock rose 25.6% in the same time, a large move but nowhere near that of its options.

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 is off 0.81% to $28.02 today but just off their 52-week high of $28.31. Gold miners have rallied as the precious metal has rebounded sharply since the end of May.