Is Gold Getting Ready to Bounce?
Source: Seeking Alpha, Frederic Ruffy (9/5/08)
Despite the ongoing woes, not everyone seems to hold a bearish view on the precious. In fact, some options strategists were seen betting on a turnaround with substantial bullish spreads on the SPDR Gold Trust (GLD) and the Market Vectors Gold Fund (GDX) yesterday.
The SPDR Gold Trust saw bullish trading. The exchange-traded fund, which holds actual bullion stored in bank vaults, fell 50 cents to $78.39 a share. Like gold itself, GLD is down more than 19 percent since mid-July. Now, however, some seem to be positioning for a rebound with bullish spreads on the ETF.
Shortly after 11:00 Eastern time Thursday, an order for 15,000 of the GLD December 80 calls traded on the offer or for $4.17 a contract on the ISE. At the same time, 15,000 of the December 94 calls traded bidside for 92 cents. With the GLD sitting near $78.00, the trading activity has all of the characteristics of a bullish call spread. If so, the strategist in question is positioning for a rebound and willing to pay a debit of $3.25 to enter the spread. The upside breakeven (at expiration) is consequently $83.25 with a profit potential of $10.75 (per spread) should GLD rally back up to $94.00 a share by December options expiration, which would equate to roughly $940 an ounce for the precious metal itself.