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After settling at a near-three-month high yesterday, the SPDR Gold Trust (ETF) (NYSEARCA:GLD) is up 1.2% at $137.05, as concerns about Syria bolster gold's safe-haven appeal. Nevertheless, some option traders are calling a top for GLD, as evidenced by yesterday's affinity for short calls.
By the closing bell, GLD had seen around 89,000 calls cross the tape -- nearly twice the number of puts exchanged. Most active was the out-of-the-money November 140 call, which saw 6,735 contracts change hands.
The majority of the November 140 calls traded in one fell swoop, as a block of 6,250 contracts crossed in the final hour of the session. The calls were exchanged between the bid and ask prices, but Trade-Alert indicates they were likely sold to open as part of a buy-write strategy for $2.92 apiece. Open interest skyrocketed at the strike overnight, underscoring our suspicions of new positions.
By writing the calls to open, the seller expects GLD to remain south of $140 through the closing bell on Friday, Nov. 15, when the options expire. In this best-case scenario, the calls will remain out of the money, and the trader can pocket the entire premium received from the sale -- $2.92 per contract, in this case. Should GLD topple $140 -- a feat not accomplished since mid-May -- the seller could be assigned, meaning he or she would have to deliver shares of GLD for $140 apiece, no matter how high the ETF should rally.
At last check, gold futures have entered bull-market territory, up $25.90, or 1.9%, at $1,419 an ounce.