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Huge put selling in gold miner fund

David Russell (david.russell@optionmonster.com)

Gold miners have been trying to bottom, and one investor is confident they will remain on solid ground.

optionMONSTER's tracking systems detected heavy put selling in the Direxion Daily Junior Gold Miners Bullish 3x Fund, which is designed to deliver triple the move of small gold miners. It's a highly leveraged and volatile fund, so writing protection let investors collect income in return for assuming downside risk. If JNUG holds its ground, the puts will expire worthless and they'll keep the premium as profit. (See our Education section.)

They targeted several contracts expiring in December: The 10s were sold for $1.10, the 16s were sold for $3 and the 17s were sold for $3.70. Similar trades also hit in most other strikes down to 10.

JNUG rose 3.36 percent to $23.70 yesterday. The fund has moved sideways since it was launched in October, following the performance of other gold miners. Buying it outright would have required a rally to generate profit. Selling puts lets them make money even if it moves sideways or falls slightly.

Total option volume was more than 5 times average amounts in the session.



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