Traders Are Making Big Bets On Bearish Gold Miners ETFs

Over the past month, the two largest, non-leveraged gold miners exchange traded funds (ETFs), one of which tracks small-cap miners, are off 5 percent and 6.2 percent, respectively. Those declines are encouraging some aggressive, risk-tolerant traders to scamper into inverse leveraged gold miners ETFs.

Wilting gold miners equities often spark increased interest in the Direxion Daily Gold Miners Index Bear 3X Shares DUST and the small-cap equivalent, the Direxion Daily Junior Gold Miners Index Bear 3X Shares JDST.

DUST attempts to deliver triple the daily returns of the NYSE Arca Gold Miners Index, one of the most widely followed gauges of gold miners stocks. JDST looks to deliver triple the daily returns of the MVIS Global Junior Gold Miners Index.

That small-cap index tracks the performance of foreign and domestic micro-, small- and mid-capitalization companies that generate, or will potentially generate, at least 50 percent of their revenues from gold mining and/or silver mining, according to Direxion. They could also hold property or have mining projects that have the potential to produce at least 50 percent of the company’s revenue from gold or silver mining when developed or primarily invest in gold or silver. 

Bumpy Rides

DUST and JDST are popular with risk-tolerant traders due in large part to the tendency of these ETFs to deliver double-digit intraday gains when gold miners fall. Of course, there is another side to that coin. Just as easily as DUST and JDST can rise 10 percent or more, these ETFs can give all those gains back and more the following day.

That is to say that no leveraged ETF should be held for the long-term and that advice particularly pertains to DUST and JDST. The volatility metrics applicable to DUST and JDST underscore the point that these ETFs are best used as intraday trades.

Over the past month, only one of Direxion's triple-leveraged inverse ETFs has been more volatile than JDST and DUST, according to issuer data. 

Traders Are Returning

Even with all that volatility, traders still love DUST and JDST. While traders have been departing the bullish equivalents of these ETFs, they have recently been piling into DUST and JDST.

Over the past month, DUST has averaged daily inflows of nearly $11 million, good for the highest total among Direxion's leveraged bear funds, according to issuer data. JDST has been solid on the inflows front as well, averaging $3.3 million in daily inflows over the past month.

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