Mark Cuban sparks 'berserk' bets on gold

Options Action: Time to buy gold?
Options Action: Time to buy gold?   

When it comes to gold, traders including billionaire investor Mark Cuban are turning to the options market.

On CNBC's "Fast Money Halftime Report" on Thursday, Cuban said he has bought "a lot" of call options in gold in response to widespread confusion over tumultuous markets.

"When traders don't know what to do, they go where everybody is, and I thought there was a good chance that would be gold," Cuban said.

Read MoreCuban: 'Confused' about markets, betting on gold

Following Cuban's comments, "option volume went berserk," Dan Nathan of RiskReversal said on CNBC's "Fast Money."

The gold ETF, GLD, traded at four times its average daily volume on Thursday, with call options outnumbering put options by 4-to-1. One particularly bullish trader placed a big bet that GLD could surge 19 percent in the next month.

On Thursday, that trader bought 20,000 of the March 140-strike calls in GLD for 30 cents per 100-share contract. This is a $600,000 bet that GLD rises above $140.30 by March expiration.

Looking at the chart of GLD, Nathan said the ETF should run into resistance at $120. If it fails to break above that level, he sees GLD going back to $100.

Gold prices have soared more than 16 percent this year as stocks around the world have tumbled. In the Thursday interview, Cuban clarified that his big gold bet was purely based on short-term psychology rather than a long-term investment.

"I think gold is more religion than fundamental. I don't see it as a hedge. This is purely a trade," he said.

Options Action Newsletter:

Sign up to receive exclusive Options Action content. Each month you'll receive an exclusive message from host Melissa Lee and insight directly from one of the members of our Options Action panel. Keep your pulse on the market with the Options Action newsletter.

Please enter a valid email address
To learn more about how we use your information, please read our Privacy Policy.

Contact Options Action

  • Showtimes

    Fridays, 5:30p ET
    Saturday, 6a ET
    Sunday, 6a ET
  • Melissa Lee

    Melissa Lee is the host of CNBC's “Fast Money” and “Options Action.”

Sponsored Related Links

More on thinkorswim by TD Ameritrade

  • Make sure you’re always keeping up with the market with up-to-the-minute news and breaking stories. Move on possible breakout stocks and options with potential opportunity. Plus, get in-depth analysis on futures and forex in one seamless, integrated experience. Join TD Ameritrade and trade commission-free for 60 days + get up to $600 cash.