The Nearly $1 Million Bullish Bet On Gold

SPDR Gold Trust (GLD) has been struggling along with gold prices, amid the revived Trump rally

Jan 27, 2017 at 12:21 PM
facebook twitter linkedin

Gold prices have been slipping, as the revived Trump rally keeps equities hovering near record highs. The SPDR Gold Trust ETF (GLD), for instance, has shed 1.7% week-to-date, last seen at $113.13, paring its year-over-year lead to 6.2% following a roller-coaster ride in the past 12 months. The exchange-traded fund (ETF) fell off sharply after election day in the U.S., and, since finding a floor in the $106 region in mid-December, has attempted to muscle back. But the rebound was recently halted just shy of the $116 mark, which corresponds with GLD's declining 80-day moving average -- a trendline that sent the shares abruptly higher in June. Still, at least one options trader is betting on a notable recovery in the coming months.

GLD Daily Chart January 27

According to Trade-Alert, one speculator Thursday initiated a long call spread by buying to open 25,000 April 125 calls for $0.46 apiece, while simultaneously selling to open the same number of April 140 calls for $0.08 each. This resulted in an initial cash outlay of $950,000 (number of contracts * $0.38 net premium paid * 100 shares per contract). The goal is for GLD to rally beyond breakeven at $125.38 (bought strike plus net debit) -- which the ETF hasn't seen since early October -- by April options expiration, a time frame that includes two Fed meetings. Regardless of how high GLD should rally, though, gains are capped due to the sold call.

SPDR Gold Trust ETF (GLD) is no stranger to call action. After all, nine of the 10 highest open interest positions are calls, with the top four spots belonging to deep out-of-the-money strikes in the March and January 2018 series. Given these strikes reside so far above GLD's current price, it's possible some of the activity here could be of the hedging kind -- especially as demand for gold increases among large speculators.

Schaeffer's Expiration Week Countdown subscribers just made 97.5% GAINS on SPDR Gold Trust (GLD) puts! Sign up now for a trial subscription.

Minimize Risk While Maximizing Profits

There is no options strategy like this one, which consistently minimizes risk while maintaining maximum profits. Perfect for traders looking for ways to control risk, reduce losses, and increase the likelihood of success when trading calls and puts. The Schaeffer’s team has over 41 years of options trading success targeting +100% gains on every trade. Rest assured your losses are effectively limited to your initial cost at the time of making your move! Don't waste another second... join us right now before the next trade is released! 



Special Offers from Schaeffer's Trading Partners