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Put buyer takes other side of gold trade

Chris McKhann (chris.mckhann@optionmonster.com)

Gold is bouncing sharply today, but one trader is positioning for a potential drop in the precious metal's largest exchange-traded fund.

The SPDR Gold Shares ETF is up 3.18 percent to $155.85 this afternoon after seeing its lowest close in more than a month yesterday. Today's big surge in the GLD closes some of the gap that had opened when it collapsed from above $157 on June 21. The fund was trading above $172 in early March.

A trader bought 5,408 September 126 puts for $0.35, acccording to optionMONSTER's Depth Charge system. Open interest at the strike was a mere 311 contracts at the beginning of the day, so is a new position.

The put buying could be an outright bearish bet or a hedge against a long position in the fund or in gold futures. It is also possible that the trader is using the puts to create a long-volatility position that can profit if shares move sharply higher or lower. (See our Education section)

The option volume in the GLD is heavy with more than 188,000 contracts changing hands, compared with a daily average of 124,126 in the last month. Calls outnumber puts by nearly 2 to 1.

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