GDXJ play

I like GDXJ for a short February strangle. No significant earnings risks from holdings. The largest holding, IAG (Canada), is just 6.34% weighted as of Jan 5 and hasn’t had a post earnings close greater than 13% over the past 12 releases. AGI (also Canada), the second largest holding, hasn’t had an earnings move greater than 8.6%.  Good open interest but light activity in the Feb 17 expiry compared with more  heavily traded ETFs. Decent bid/ask spreads. 14 period ATR on OPEX bars is about $8.5, with current range for the January expiry at $10+. Good premium for OTM spreads


Given the election and monetary risk events in November and December are behind us and the odds of a rate hike before midyear are about 50%, I’m cautiously thinking this ETF will begin to consolidate between $42 and $32 for the next few weeks.

gdxj-payoff-2017-01-07_18-11-40I want to allow some room for the market, so will place OTM short calls at $43 and puts $29. Smallish size at 5 contracts per strike and a little above current price (about $1.12 for the spread). I’ll adjust if there are any out-sized moves. Looking for between 25% and 35% on this one within three to four weeks, but I’ll take more if I can get it. Hoping not to see more than a 50% unrealized loss before theta kicks in. This is the first trade in GDXJ.


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