If you are viewing SPDR Gold Share (GLD)the yellow metal is holding firm and appears to be rebounding from its 150-day moving average (support). If you want to use the 200-day moving average, its support level is just below $400, which is also the roughly 50% Fibonacci retracement level.
Here’s how to trade in a technical setting: June $395/$445/$480 Call Spread Risk Reversal.
SPDR Gold (GLD) since the beginning of the year
This strategy provides a bullish, low-decay strategy for a total net withdrawal of just $4.00 per contract, or 1% of the current price. Of course, selling that low-strike put would give you a lot of cash, but it would be less than simply buying 100 shares of GLD.
Sell June $395 Put Buy June $445 Call Sell June $480 Call Skill Level: Advanced
Why this strategy wins
Organized around key technical levels: Immediate resistance appears to be at $441. By setting the long call strike to $445, you avoid paying the “hopium” premium. Instead, use call spreads to reduce the immediate resistance barrier. Meanwhile, its short $395 put sits comfortably around the lower support level. If GLD declines, $395 is a level where you can consider starting to add to your position. By selling that put, you take on that risk, which is acceptable. Weaponizing “Call Skew”: Gold and other commodities typically follow different rules than stocks regarding option pricing. For stock options, puts generally trade at a premium over at-the-money options and out-of-the-money calls. In commodities, when geopolitical tensions or inflation concerns rise, investors often race for price calls, making out-of-the-money options more expensive than at-the-money options. By selling a call with a higher strike price of $480, we take advantage of this “call skew” and significantly subsidize the cost of our $445 upside exposure. Theta Sleep-Easy Factor: A pure long option position drains your money every time you wait for a move. Because you are selling both an out-of-the-money put and a high-strike call, time decay (theta) is significantly reduced. Time is no longer your enemy.
Risk reversal allows you to spend slightly less money than buying GLD stock at $433 and capture a large portion of the anticipated “gold rush” with little to no premium outlay. You have clearly defined and subsidized upside, a meaningful buffer on the downside, and the ability to trade with the dynamics of the options market rather than against it.
Go long, take advantage of the skew, and let the 150-day moving average do the heavy lifting.
