Description - AMEX Gold
BUGS Index HUI
Two major gold indices dominate the market: The AMEX Gold BUGS Index (HUI)
and the XAU, which is listed on the Philadelphia Stock Exchange. The
biggest difference between the two indices is that the AMEX Gold BUGS
Index is comprised exclusively of mining stocks that do not hedge their
gold positions more than a year-and-a-half into the future. Because of
this, the HUI tends to be more profitable than the XAU when gold prices
are rising; however, losses will accumulate more quickly when the price
of gold declines.
The AMEX Gold BUGS Index was
introduced on March 15, 1996; trading began at a level of 200 index
points. BUGS is an acronym that stands for “Basket of Unhedged Gold
Stocks”. The Index comprises 15 of the nation's largest “unhedged”
gold mining stocks. It is a modified equal dollar weighted index of
companies involved in gold mining; this means that the stocks in the
index are all equally weighted.
Adjustments to the AMEX Gold
BUGS Index are made quarterly, occurring after the market close on
the third Friday of March, June, September, and December.
While the AMEX Gold BUGS
Index increases quickly along with rising gold prices, it will also
decline much faster during weakening gold prices than its hedged
cousin, the XAU.
The AMEX Gold Bugs Index has
a high correlation to the spot price of gold. Trading
options on the
HUI index is thus one of the many ways traders can invest in gold
(among gold funds, futures, options, or the metal itself).
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