SPDR Gold Shares Options (GLD): Unusual Trading Activity

| August 27, 2012 | 0 Comments

GLD OptionsOptions in the SPDR Gold Shares (GLD) lit up our tracking system Friday afternoon with huge put selling activity. 

I think the put selling is simply a result of gold popping in recent weeks and traders thinking the gains will hold.  While GLD fell fractionally Friday morning to $161.74 as spot gold prices drifted lower to $1,620 per ounce, the ETF is up more than 4% since mid-August.

I have repeatedly cited frequent call buying in this fund as investors bet on a rally in the shiny metal.

But now, traders are mixing things up a bit and starting to sell put options instead of buying call options.  Let’s not forget, both strategies are meant to take advantage of a move higher in gold prices.

Here’s what caught my eye…

A trade in the GLD August 161 puts expiring this Friday stood out, with 5,000 put contracts changing hands for $0.97 a piece.  In other words, this trader collected $485,000.

This represents a bet that GLD will hold above $161 for the next five sessions.  If this holds true, this trader will take the entire premium and deposit it into his bank account.  

So, is GLD now in an uptrend? 

Obviously there are option traders who feel it is.  They’ve made their bullish opinions readily apparent by an enormous amount of bullish option trading in GLD over the last week.

And while historically gold prices usually move higher as stocks move lower, this has not been the case recently.

Gold broke out of a range last week and continues to move higher… whether the market is moving up or down.  And if the broad commodity market continues to be volatile, gold prices should continue to rise.

As you might have guessed, I’m in total agreement with this trade. 

GLD’s continued surge is based on fear of inflation and fear of a currency collapse.  So it’s very likely we won’t see a reversal anytime soon.

We’ll see how this trade works out, but I’m jumping in.

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Safe Trading,

Marcus Haber

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Category: Unusual Options Trading Activity

About the Author ()

Marcus Haber is the co-editor of Options Trading Research and boasts well over a decade of real-life options experience. Learning from some of the biggest names in the business, Marcus has served as an Options Strategist for a number of firms and was also appointed to the Options Advsiory Board with Pershing, a branch of the Bank of New York.