Call Buyers Keep Lining Up For the Sliding SPDR Gold Trust ETF (GLD)

One trader bought to open a 10,000-contract sweep of SPDR Gold Trust ETF (GLD) call options

Nov 7, 2016 at 11:31 AM

SPDR Gold Trust ETF (GLD) options are trading at a brisk pace, as the exchange-traded fund (ETF) tracks the precious metal lower. Currently, December-dated gold futures are down 1.7% at $1,281.90 amid a strong dollar, and a rally in stocks sparked by waning election fears. Likewise, GLD is down 1.7% at $122.22, while its options are changing hands at 1.7 times the expected intraday rate.

The largest transaction so far involved matching blocks of 11,077 November 128 and 135 calls. According to Trade-Alert, a trader is likely closing a bullish spread opened last week. In terms of fresh activity, one speculator bought to open a sweep of 10,000 weekly 11/11 129.50-strike calls, echoed by International Securities Exchange (ISE) data. This bullish bettor is counting on a GLD rebound north of $129.50 by week's end, when the series expires.

In general, options traders have been pretty bullish toward the shares. The ETF sports a top-heavy 10-day call/put volume ratio of 3.94 across the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). What's more, this ratio outranks 94% of comparable readings from the past year. Not to mention, GLD's Schaeffer's put/call open interest ratio (SOIR) of 0.30 registers in the low 21st annual percentile, with short-term calls tripling puts.

Short interest is almost nonexistent on the ETF, too. During the last two reporting periods, these bearish bets fell nearly 27% to 6.6 million shares. While that may seem sizable, at GLD's average trading level, it would take less than one session to cover those positions.

Based on the charts, this confidence seems misplaced. Since topping out at $131.15 in early July, the SPDR Gold Trust ETF (GLD) has notched a series of lower highs and lows. If this negative momentum continues, a capitulation among option bulls and/or a reinvigoration of short sellers could exacerbate selling pressure on the shares.

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