×

Trader bets $15 million on gold’s luster

As gold continues to rally in 2016, one bold trader is betting nearly $15 million that gains for the precious metal will continue through 2017.

In a massive wager on Thursday, the trader bet that the gold ETF, ticker symbol GLD, will remain on a bullish ride through the coming year. Specifically, that trader purchased 46,000 of the June 2017 144/172 call spreads for $3 each. Since each call option contract equals 100 shares of stock, this move represents a $14.6 million wager that the ETF could rise as high as $172 by expiration, which would be a more than 30 percent gain from current levels. Furthermore, if GLD rises above $172, the trader stands to make up to $115 million.

"That is a massive bet. It's about eight times your money," RiskReversal.com founder Dan Nathan explained Thursday on CNBC's "Fast Money." "That trade is maximum value."

While the potential for these types of gains seem unlikely, Nathan reasoned that, despite diminished global growth prospects and the volatility in currencies, this trader could be making a "black swan" bet or leveraging from an already-existing position. And, looking over the past eight years, Nathan highlighted a strong bounce for the ETF off its $100 level in 2015.


"It's up about 30 percent since late December, which was the 52-weeks lows," noted Nathan, who warned that this is not a trade for the faint of heart. "We know that $140 would be a massive breakout level. Listen, this is not the sort of trade you want to do if you think gold is going higher. You're not going to look 15 percent out of the money a year out."

Nathan added that the majority of the call volume for gold this year has been investors following the metal's rise up on a short-dated basis. On Thursday, call volume for GLD was two times that of puts as traders remain bullish on the yellow metal.

"They buy calls. They roll them out when it gets to their level. They keep that exposure and use some of the profits," said Nathan, who concluded that the $15 million bet represents "a very long holder of GLD, leveraging up that position looking out a year."

Latest Video

Tutorials

Host Bio

  • Melissa Lee

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

Options Action Traders

From Our Sponsor

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.