Market Vectors Gold Miners ETF (GDX)

October 24, 2008

Dear Fellow Options Trader,

Gold has clearly not been a safe haven, folks. Anyone who went into gold is down. And just like the market, it depends on your entry as to how much you are down. Top to bottom, thus, far is over 30% on the year! OUCH!

Much of the slam-dancing they've done from $900 per troy ounce to $700 is probably due to liquidations of funds trying to meet other calls and thus, pressuring gold. The GDX, the Exchange-Traded Fund that seeks to replicate the performance of the Amex Market Vectors Gold Miners Index, is down more than 62% year-to-date. Top holdings are Barrick Gold, Goldcorp and Newmont Mining.

Today we see more than 5,000 of the GDX Dec 20 Calls (GBGLT) being bought on the offer, meaning we've got someone big calling for a bottom in GOLD! The calls have a bid/ask of $1.70 and $1.90.

Gold is going to shine again, and I have a bet for you today to play it on its way back up. I recommend buying the GDX Dec 18 Calls (GBJLR) for $2.60 against the sale of the GDX Dec 22 Calls (GBJLV) for $1.30 for a net debit of $1.30 for the $4 spread.

We're taking the limited-risk, big-potential-reward route with this bull-call spread strategy, as we could have a $2.70 profit if GDX trades for $22 or higher.

As always, the individual price you pay for the long leg of the spread or collect for the short leg of the spread doesn't matter, just as long as you don't pay more than $1.30 total to enter this trade.

Good luck and good trading!

Jon "Doctor J" Najarian
Editor
ChangeWave Options Trader


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