tradeMONSTER: Trade free for 90 days

Options Trading News

February 14, 2013  Thu 4:47 AM CT

GLD: SEE CHART GET CHAIN FIND STRATEGIES
A large trader apparently thinks that it's a great time to get long gold.

optionMONSTER's Heat Seeker tracking program detected the purchase of 11,000 May 172 calls in the SPDR Gold Shares fund for $0.79 and the sale of an equal number of May 188 calls for $0.14. Volume was more than 29 times the previous open interest at each strike, indicating that new money was at work.

Known as a bullish call spread, the trade is a highly leveraged strategy that will earn huge profits--but only if the fund retraces its selloff of the last six months and rallies back to new 52-week highs. With the GLD now at support levels from last summer, the transaction reflects a belief that bullion is getting ready to rally. (See our Education section)

It cost $0.65 to open the trade, which will expand to $16 if the fund closes at or above $188 on expiration--a profit of 2,362 percent. (See our Education section for more on how options can be used to amplify moves in shares prices.)

The GLD fell 0.53 percent to $159.05 yesterday and has been consolidating in its current range for the last 18 months. If the current level holds, it would represent a higher low from 2012's trough, which some chart watchers may consider evidence that the long-term uptrend remains in effect.
Share this article with your friends


Related Stories

GLD

Traders go digging for gold again

November 28, 2014

Bullish traders piled into the SPDR Gold Fund on Wednesday for the second time in three days. The trade also follows upside action in the iShares Silver Fund.

Invest Like a Monster - Las Vegas: March 13-14

Premium Services

Archived Webinar

The Art of Trading: Forgiving the Spread

Education & Strategy

Know thy Greeks!

One of the most important roles played by the Option Pricing Model is the calculation of an important family of...

View more education articles »
optionMONSTER stockMONSTER tradeMONSTER