Bearish option traders have earned an exponential return on their money in put strategies on the VanEck Vectors Junior Gold Miners Fund (GDXJ).
On Jan. 24, Market Rebellion’s Unusual Option Activity Service found that 12,500 February $38 puts were bought for $0.70 to $0.71 as part of a bearish spread above the existing open interest of 1,636 contracts with shares at $40.44.
Those puts have traded up to $4.05 today, more than 5.5 times their purchase prices. The stock declined 16.35% in the same time period, a large move but nowhere near that of its options on a relative basis.
Long puts lock in the price where a stock can be sold no matter how far it might drop, gaining value in a selloff with the potential for significant leverage. The contracts can be purchased either as an outright bearish bet or a hedge on a long-stock position.
GDXJ settled the session down 0.29% at $34.59.
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