Stocks quoted in this article:
The SPDR Gold Trust (ETF) (NYSEARCA:GLD) has followed gold futures into the red, giving up about 14% so far in June. In fact, the exchange-traded fund has surrendered 0.6% right out of the gate, touching a near two-year low of $114.68. Nevertheless, options traders on Thursday placed bullish bets on GLD, picking up intermediate-term calls to gamble on a rebound.
During the course of the session, the SPDR Gold Trust ETF saw roughly 288,000 calls change hands -- more than three times the norm. Most active was the October 131 call, which saw more than 52,100 contracts cross the tape. Digging even deeper, most of the action transpired in a block of 46,700 contracts, which traded at the ask price of $1.75, suggesting they were bought. Plus, call open interest skyrocketed at the out-of-the-money strike overnight, hinting at fresh initiations.
By purchasing the calls to open, the buyers expect GLD to stage a notable rebound over the next few months. More specifically, the traders will begin to profit if GLD reclaims the $132.75 level (strike price plus the premium paid) by October options expiration. From current levels, it would take a rally of about 15.8% in order to hit breakeven. Risk, meanwhile, is limited to the initial premium paid for the calls, should GLD fail to climb back atop the strike in time.
Speaking of option premiums, GLD's Schaeffer's Volatility Index (SVI) has soared to a 52-week peak of 31%, reflecting escalating demand for the ETF's contracts. In other words, GLD's short-term options are relatively expensive at the moment, as traders rush to roll the dice on the equity's -- and, ultimately, gold's -- near-term trajectory.
However, puts are the options of choice among GLD's short-term options crowd. The stock's Schaeffer's put/call open interest ratio (SOIR) of 0.72 stands just 7 percentage points from a 52-week peak, implying that near-term traders have rarely been more put-heavy during the past year.