Loading...
Most Recent Stories

BIG MONEY COTINUES TO BET AGAINST GOLD

We saw more interesting options activity from big players in the GLD and UUP contracts today.  These institutional traders are betting on a spike in the dollar and a potential 20% decline in gold prices.

GLD – SPDR Gold Trust ETF – A massive bearish butterfly spread on the gold ETF caught our eye today amidst a 0.50% decline in the value of its shares to $112.38. One medium-term pessimist, who is likely long shares of the underlying stock, established large-volume protective stance in the September contract. The investor purchased 20,000 puts at the September $90 strike for $1.50 apiece [wing 1], and bought 20,000 puts at the lower September $60 strike for an average premium of $0.19 each [wing 2]. The central September $75 strike housed the body of the butterfly comprised of 40,000 sold put options for a premium of $0.35 apiece. The net cost of the bearish play amounts to $0.99 per contract. Downside protection kicks in if shares of the GLD plummet 20.80% from the current price to the upper breakeven point at $89.01. The investor’s underlying position is protected in case the fund’s share price declines through the 52-week low on the fund of $78.87, down to a price of $75.00 each.

UUP – PowerShares DB US Dollar Bullish Fund – Dollar-bulls established call spreads on the UUP today, which is the Deutsche Bank Long US Dollar Futures Index, designed to replicate the performance of the greenback against a basket of currencies of its major trading partners. Shares of the fund slipped 0.25% lower during the session to $22.67. Call-spreaders purchased 20,000 calls at the June $23 strike for an average premium of $0.60 apiece, and sold 20,000 calls at the higher June $26 strike for $0.08 each. Investors paid an average net cost of $0.52 per contract for the debit spreads. Option traders are now positioned to accrue profits if the price per UUP share rallies 3.75% to breach the breakeven price of $23.52 by expiration in June. Maximum potential profits of $2.48 per contract are available to the investors if the index comes roaring back up to $26.00 per share. The UUP last settled above the strike price last Thursday and has only closed above $23 per share on 10 occasions since the start of December.

Source: IB