Talk about some volatility. We’re watching 2-3% daily moves in the US stock markets and 5% plus daily moves in Asia. When volatility is this high, and when you were buying VIX calls back when volatility was extremely low just a few weeks ago, it’s time to take profits and close the trade. I’m closing out my VIX long position today.

Meanwhile, you know that I don’t trust the gold ETFs and other precious metal “paper” trading vehicles. But I do think the GDX Gold Miner ETF is valid since it’s promising stock shares in publicly traded companies and not promising physical gold and silver which might or might not actually be owned and in the vaults. I’ve often advised against owning gold miner stocks because they are often high-beta versions of gold itself, meaning when gold drops 30% like it has, gold miner stocks will drop maybe twice that much, 60% or more.

Indeed, take a look at this chart.

So here’s what I’m doing. I’m taking the proceeds of that winning VIX calls trade and using them to buy slightly out of the money call options in the GDX (strike prices from $25-28 and expiring in January 2014, paying about $2.50-$1.50 respectively each). See, if gold comes back 10-20% in the near-term, or even if it just finally finds a bottom, the GDX can rally back to its recent higher lows. Meaning, the GDX can pop 30% in the next few months if gold can just find its footing and/or actually rally. In some sense then, the GDX is a good levered-up vehicle for trading gold into year-end. Using call options for the trade makes it even more levered-up. So as usual, this options trade is very risky and probably more so than usual. But when I see an opportunity with a good risk/reward ratio like this, I want to sneak in for a trade.