GLD Options Popular as Fund Flirts With New Highs

Traders are either betting on or hedging against a GLD pullback

Apr 11, 2018 at 2:29 PM
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Gold prices ended higher for a fourth straight session, as rising geopolitical tensions whet the collective appetite for "safe haven" assets. As such, the SPDR Gold Shares ETF (GLD) is eyeing its highest close in over two months, and GLD options are crossing the tape at three times the typical intraday pace. At last check, the exchange-traded fund (ETF) was up 1.1% at $128.58, and earlier peaked at $129.47 -- just pennies shy of a fresh annual high.

Roughly 178,000 GLD calls and 83,000 puts have changed hands so far. The most active option is the May 123 put, where it looks like several blocks were possibly bought to open. By purchasing the puts to open, the buyers are either betting on or hedging against the ETF dropping back beneath the $123 level -- and breaching its 200-day moving average -- by May options expiration.

Whatever the motive, GLD's short-term puts have rarely been cheaper relative to calls. The fund's 30-day implied volatility skew of negative 31.5% is at the bottom of its annual range.

GLD calls have certainly been in demand lately. On the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the fund's 10-day call/put volume ratio sits at 2.48 -- in the 95th annual percentile. This means that GLD options buyers have picked up calls over puts at a much faster-than-usual clip during the past two weeks.

Nevertheless, near-term put open interest is still more prevalent than usual. While the ETF's Schaeffer's put/call open interest ratio (SOIR) of 0.71 indicates that short-term calls still outnumber puts on an absolute basis, it registers in the 96th percentile of its annual range. In the front-month series, the April 126 put is most popular, with nearly 22,000 contracts outstanding -- which could translate into an added layer of options-related support for GLD through next week.


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