The SPDR Gold Shares Fund has bounced again off support, but a long-term trade is positioning for a sharp move higher or lower.
The biggest option trade of the day in the GLD came in the December 2013 168 puts. optionMONSTER systems show that a trader sold 5,800 of those contracts for the bid price of $13 and at the same time bought 8,700 of the 145 puts for the ask price of $3.96. The previous open interest at each strike was under 100 contracts, so this is a new position.
The strategy, known as a backspread , is designed to profit if the GLD is above $168 at expiration or if it drops dramatically. The trader keeps the credit as profit to the upside, but the additional puts kick in if shares fall sharply. (See our Education section)
The GLD finished the day at $165.63. The exchange-traded fund was down fractionally on the day, but bounced off support below $164 last week. Shares traded as high as $174.07 in early October.
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