Gold BUGS Index (HUI)

What it is:

The AMEX Gold BUGS Index (also known as HUI) is one of two major gold indices that dominate the market. BUGS is an acronym for "Basket of Unhedged Gold Stocks." The index was introduced on March 15, 1996.

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How it works/Example:

The AMEX Gold BUGS index is made up exclusively of mining stocks that do not hedge their gold positions more than a year-and-a-half into the future.

The Gold BUGS Index is comprised of 15 of the nation's largest unhedged gold mining stocks. It is a modified equal-dollar weighted index. As a result, most of the index's component stocks are equally weighted with the exception of a few of the largest stocks, which are more heavily weighted.

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Why it Matters:

The Gold BUGS Index and the Philadelphia Gold and Silver Index (XAU) are the two most watched gold indices on the market.  HUI is more volatile.

When gold prices are on the rise, the Gold BUGS Index provides an excellent way for investors to capitalize on that increase. The index has a high correlation to the spot price (current price) of gold.

When the price of gold declines, the Gold BUGS Index tends to fall much faster than its hedged cousin, the XAU. In addition, the firm's unusual index weighting system can be difficult to understand.

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Best execution refers to the imperative that a broker, market maker, or other agent acting on behalf of an investor is obligated to execute the investor's order in a way that is most advantageous to the investor rather than the agent.