Has the gold lost its luster?
Traders on both sides of the issue are battling it out in the options pit of an ETF that is trying to counter a months-long downward trend in the commodity.
Both option volumes trended bullish. SPDR Gold ETF (GLD) and VanEck Gold Miners ETF (GDX) On Tuesday, GDX rose more than 4% even as gold futures fell during trading. The bullish trend was particularly strong on GDX, with call volume outnumbering puts by more than 5 to 1 at some points during the trading day.
According to ThinkOrSwim data, more than 10,000 calls traded at or above ask on GDX, meaning 4,400 were likely bought for every put bought. According to SpotGamma, the most popular contracts based on volume were the 100 call and 110 strike call expiring on June 18th. It would take a big double-digit rally from here for these calls to break even.
Another, much larger trader in the same GDX market doesn’t think that will happen.
The biggest premium trade of the day was someone who spent more than $1 million to scoop up thousands of 85-strike puts expiring on July 17th, more than the combined premium of both the $100 and 110 calls.
With geopolitics remaining unpredictable and the interest rate outlook muddy, the conflicting trades offer insight into what could be a make-or-break moment for precious metals. Gold has fallen about 20% from its all-time high in January, but is still up 89% over the past two years. In contrast, gold miners grew by 144% over the same period.
gold futures, 1 year
Traders looking for another clue may find one in options trading around gold miners newmont miningTuesday’s activity approached 100,000 contracts, with option premiums approaching $500 million, according to Spot Gamma. Trading was significantly bearish, with multi-million call sales including one of the biggest trades of the day, a $22 million deep-in-the-money call sale, often a sign that someone was exiting a position in a stock.
