A battle is brewing in the gold pits. Here are the winners and losers
Has gold lost its shine?
Traders on both sides of the issue are turning to the options pit of an ETF trying to offset several months of downtrend in the commodity.
Option volumes trended upward in both cases SPDR Gold ETF (GLD) And VanEck Gold Miners ETF (GDX) On Tuesday, GDX gained over 4% despite gold futures falling in the session. Upside flows were particularly strong on GDX; Call volumes exceeded 5-to-1 at one point during the trading day.
According to data from ThinkOrSwim, more than 10,000 calls traded at sell or above on GDX; This means it is more likely to be purchased compared to 4,400 puts purchased. The most popular contracts by volume were 100- and 110-strike calls expiring on June 18, according to SpotGamma. These calls need major double-digit rallies from here to break even.
A separate, much larger trader in the same GDX market doesn’t think this will happen.
The biggest premium trade of the day was when someone took advantage of thousands of 85-strike puts expiring on July 17 by spending more than $1 million (more than the total premium on both the 100 and 110 calls).
As geopolitics remain unpredictable and the interest rate outlook remains cloudy, contrarian trades offer perspective on what could be a make-or-break moment for the precious metal. Gold is down almost 20% from its all-time high in January but is still up 89% over the past two years. Gold miners increased by 144% in the same period.
Gold futures, 1 year
Traders looking for another clue may find one in options trading around gold mining Newmont MiningActivity on Tuesday approached 100,000 contracts and almost $500 million in option premiums, according to Spotgamma. Trading was distinctly bearish, with millions trading, including a profitable $22 million call, one of the largest trades of the day, which is usually a sign that someone is exiting a stock position.
