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Options traders bet that this gold rush isn't just a flash in the pan

Options traders get bullish on bullion
Options traders get bullish on bullion

Rising tensions in the Middle East are whipping commodity markets into a frenzy.

After an initial spike, crude oil prices are falling as investors rethink supply risks, while gold is breaking out to near seven-year highs as traders look for a safe haven to hedge equity risks amid uncertainty surrounding potential fallout from the situation in Iran.

But is this gold rush just a flash in the pan? Not according to the options market.

"In GLD options, which is the ETF that represents gold, it had traded about two times the average daily call volume just by midday today, and where we saw most of that activity was the February 152-calls," Optimize Advisors President Mike Khouw said Monday on "Fast Money."

Over 33,000 of those calls traded for an average price of $1.50 per contract, meaning that buyers of these calls will see profits if GLD rises above $153.50 per share by February expiration.

That represents roughly a 4% move higher from Monday's close, which lies in stark contrast to what investors expect out of some other indicators of uncertainty.

"Most of the bets we saw were more reflation-oriented than volatility-oriented. We didn't see a lot of bearish bets in [the S&P 500 or the SPY ETF that tracks the index]," said Khouw.

The GLD ETF and gold bullion futures were both trading slightly higher Tuesday.