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Light at end of tunnel for gold miners?

Chris McKhann (chris.mckhann@optionmonster.com)

A large trader is looking for a floor in the Direxion Shares Daily Gold Miners Bull 3x Fund.

optionMONSTER systems show that more than 6,700 of the NUGT October 37 puts traded yesterday, led by a block of 3,765 October 37 puts that was sold for $1.20, below the listed bid price at the time. This is clearly a new position, as open interest in the strike was just 50 contracts before the trade appeared.

These options have with a delta of 0.07 and an implied volatility of 142 percent. That means they quite far out of the money and have very high relative premium.

The put seller is looking for NUGT to remain above that $37 level over the coming months. The trader is also taking on the risk of buying shares if they are below that level by mid-October. (See our Education section)

The NUGT, which is designed to deliver triple the performance of the NYSE Arca Gold Miners Index, was up 2.13 percent yesterday to close at $64.78. It traded as low as $45.50 in late June but was above $100 just two weeks ago and above $900 a year ago.

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