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Bulls Look for Gold to Regain Luster

By Chris McKhann of OptionMonster

NEW YORK -- Gold has been falling for the last week but now traders are looking for a rebound.

OptionMonster systems Tuesday detected two large bullish spreads in the SPDR Gold Shares (GLD) exchange-traded fund, which tracks the precious metal. First, investors bought 25,000 September 130 calls for 80 cents and sold 25,000 September 140 calls for 20 cents.

This vertical spread cost 60 cents and will rise to $10 if the GLD closes at $140 or higher on expiration, a profit of more than 1,500% from bullion rising less than 20%.

Twenty minutes later, 25,000 September 135 calls were bought for 40 cents and the same number was sold at the September 150 strike for 7 cents. Tat spread cost 33 cents and will earn more than 4,400% on a move to $150.

The fund was down in the morning but rebounded and ended the session 0.26% higher to $120.01. It's down 10% in the last year.

Total option volume in the fund Tuesday was quadruple its daily average, with overall calls outnumbering puts by a bullish 5-to-1 ratio.

McKhann has no positions in GLD.

This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.

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