Gold Bug Hedge Funds Collectively Report Over $183mm In New Call Option Positions On Miners
May 18, 2013 | By Tekoa Da Silva

(excerpts)

George Soros, John Paulson, and Steve Cohen, who in aggregate control over $60 billion dollars, have been aggressively buying the most speculative vehicles associated with gold: call options on gold mining stocks.

Starting out with, George Soros, billionaire financier and chairman of Soros Fund Manangement LLC, was the target of bearish gold commentary this week issued by Bloomberg. While Bloomberg journalists correctly reported that he’s been cutting his stake in gold, what they failed to mention (which was articulated here on May 16th), was how he reallocated the proceeds.

Soros indeed cut his stake in the GLD gold fund by about $2.5mm—a paltry sum, especially given the fact that he simultaneously purchased a massive $25mm in call options on the GDXJ Junior Gold Miners Index. This purchase outweighs the physical gold sale by a factor of 10—suggesting he expects much greater gains ahead to be had in the junior mining stocks.

Reported exclusively here on February 19th, was Steve Cohen, founder of SAC Capital Partners LP, purchased a $60mm option “straddle” position on the GLD during Q4 2012, which represented the expectation of an explosive move in gold—either up or down in price. Indeed, that is exactly what occurred, and during Q1, SAC Capital Partners closed out that $60mm straddle position (no doubt at a staggering profit), while at the same time buying $66mm in call options on a major gold & copper producer. The firm also maintained over $76mm in long positions on mining equities during Q1.

The largest of the trio in terms of gold positioning for the quarter, was John Paulson, founder of Paulson & Co., which reported owning over $4.389 billion in total gold holdings. Paulson held firm his $3.3 billion stake in GLD, and further added a shocking $92mm in call options on two major gold mining companies.

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