Thank you for your question.
Yes, I often mention GDX as this proxy has several features that I find very appealing from the point option trader's point of view. These are i.a. the liquidity of the underlying equity (GDX itself) and the fact that there are many strike prices to choose from. Still, it is not only GDX that I am interested in. As you may see in the "Free Commentary" section, my previous alerts have covered also other stocks - i.a. RTP and FCX.
I think that the relatively low volume in options on GDX is not a problem. Here's why:
1. Theoretically speaking - options are derivatives. Their price cannot trade independently from the price of the underlying equity. There are mathematical/statistical models (The Option Pricing Model) that are used to calculate the "fair value" of the option with regard to several factors - and the price of the underlying equity is one of them.
As you may see here this ETF is supported by market makers. This means that there is always someone to take the other side of the trade at the price close to the value derived from the option's pricing model (naturally there is a bid/ask spread). When you have a company and many investors are buying this company's shares (and there are no sellers), then the price will spike much higher. However, if there were many option buyers for call options on these shares and there would be no change in the price of the stock itself, market makers would not "allow" the value of the option itself to spike higher. Market makers (here: sellers) would prevent the price from rising. At the same time market makers would be taking an opposite position in the equity (GDX) itself as a hedge. In other words they would be shorting options and going long in stocks. The impact on the price of the underlying security (GDX) would be the same as if you bought this amount of stocks yourself. Please note that the volume on the underlying equity here is not that small.
Moreover usually sizes of positions in the options market are only a small fraction of those that one would take in the stock market.
2. Practically speaking - during the previous two months I've had many investors on my free mailing list, and I've sent out detailed information regarding option trades - there was no visible impact on the price of GDX, nor was there any spike in the value of particular options.
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