Gold prices are already up nearly 20 percent in 2016, but some traders are betting even bigger gains are on the horizon.
On Tuesday, when gold hit a three-week high, one trader bet nearly $1 million that the GLD, the ETF that tracks gold, could reach levels not seen since 2014. Specifically, the trader purchased 20,000 May 130/138 call spreads for 38 cents each. Since each options contract equals 100 shares of stock, that's $760,000 bet that GLD could rally as high as $138 within a month. That increase would translate to a 9 percent gain from where the GLD is currently trading around $120.
"[Current action] is so levered towards calls" in the GLD, RiskReversal.com founder Dan Nathan told CNBC's "Fast Money" on Tuesday. "There's about 2.7 million calls versus 965,000 puts."
The move higher in gold this year follows back-to-back years of declines for the precious metal. Gold is often sought by investors in times of volatility and uncertainty in equities. According to Nathan, now that the downtrend has been broken, traders are piling into gold.
Nathan said much of the options activity in the GLD is concentrated around $125, with nearly 300,000 trades betting on a break above that level in the next few months.
"The strikes where all the consolidation [occurs is at] $125. We're at $120. Traders keep betting for higher," Nathan said.
The GLD was trading lower by around 1 percent on Wednesday.