Buying calls locks in the purchase price of the shares, while selling them fixes the exit price. The strategy, known as a vertical spread in this case, controls a move between two stock prices at a tiny fraction of what it would cost buying the fund directly. Of course, the risk is that it doesn’t rally, in which case the options expire worthless.
The SPDR Gold ETF fell 0.86 percent to $155.14 yesterday, continuing to trade in a range in place for the last three months. Our systems detected some huge stock trades in addition to the option activity, including prints of 239,000 and 600,000 shares. Also yesterday, the fund’s daily holdings rose for the first time in more than a month.
They’re all looking for gold to go higher. So am I.
—By CNBC Contributor Jon Najarian
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Options Trading School:
Jon ‘DRJ’ Najarian is a professional investor, CNBC contributor, and cofounder of OptionMonster.com. Najarian is long GLD.