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As the SPDR Gold Trust (NYSEARCA:GLD - 172.06) perpetuates its recent rally -- up 11.4% since the beginning of August -- option bulls are keeping their positions alive and well. In today's action, it looks as though an investor is closing out of a block of 6,000 long September 175-strike quarterly calls (expiring in seven days) and opening new October-dated, 178-strike calls.
The investor is selling to close the September options for $0.79 per contract and buying to open the back-month calls for $1.37 each. This expresses the belief that the GLD will rally to at least the $179.37 mark by options expiration, above which point gains are unlimited. Losses -- should the ETF fail to top the $178 level in the next four weeks -- are limited to the premium paid.
The $179.37 level is about 4.2% above the security's current perch and would represent a new annual high. But there has been a lot of bullish speculation on this name. During the past 50 trading days at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), 222 calls have been bought to open for every 100 puts. The resultant call/put volume ratio of 2.22 is higher than 97% of the past year's worth of readings. In other words, speculators have rarely been more bullish this year.
Also active today is the September 172 put. Although this option expires in mere hours, roughly 16,000 contracts have traded versus open interest of fewer than 3,500. The orders have been largely split between the bid and the ask, suggesting the action is a mix of buyers and sellers.
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