Gold: How Bullish Options Traders Are Playing

As the markets fall across the board Friday, gold ETFs are seeing bullish options activity after rising steadily over the last week.

The SPDR Gold Trust exchange traded fund opened under $80 last Thursday and is trading around $86.50 this morning. Heavy volume of 132,000 contracts changing hands in the first 90 minutes of the session alone dwarfs the 20-day average of 47,727.

The GLD put-call ratio is very bullish at 0.26, according to OptionMonster's tracking systems, meaning that calls outnumber puts by roughly 4 to 1. The action includes 7,500 GLD calls that just traded at the February 87 strike against open interest of 1,963, with 6,800 of those contracts going off in a single block for $3.10.

Gold has often been viewed as the ultimate safe haven in troubled economic times, though that theory was disproved when the precious metal fell at the height of the financial crisis. Recently, however, the precious metal has been trading in a technical "pennant" pattern suggesting that it was poised to break either up or down as its price range narrowed.

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Other gold-related ETFs have risen in the last week or so, including the Market Vectors Gold Miners Fund, which hit a low of $27.15 last Thursday and is trading over $33 this morning, a gain of more than 20 percent in that time. Two other gold ETFs have also risen since then, the iShares COMEX Gold Trust and the PowerShares DB Gold, both up roughly 10 percent in that period.


Mike Yamamoto is Managing Editor of OptionMonster Media.