Bulls Look for Rally in Gold Fund
By Jon "DRJ" Najarian, co-founder of OptionMonster
NEW YORK -- Traders are betting big that gold is heading higher.
On Wednesday, OptionMonster's tracking systems detected some large bullish plays in the SPDR Gold Shares (GLD) exchange-traded fund. Traders bought the November 180 calls and sold the November 210s for a net cost of 92 cents. If the fund reaches that $210 strike price, they stand to make $20 on that trade.
Buying calls locks in the purchase price of the shares, while selling them fixes the exit price. The strategy, known as a vertical spread in this case, controls a move between two stock prices at a tiny fraction of what it would cost buying the fund directly. Of course, the risk is that it doesn't rally, in which case the options expire worthless.
The fund fell 0.86% to $155.14 Wednesday, continuing to trade in a range in place for the last three months. Our systems detected some huge stock trades in addition to the option activity, including prints of 239,000 and 600,000 shares. Also Wednesday, the fund's daily holdings rose for the first time in more than a month. They're all looking for gold to go higher. So am I. Najarian is long GLD.Select the service that is right for you!
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