- Gold has rallied 15% in August, its best monthly gain since 2008
- A large bearish options trade on GLD suggests a potential short-term pullback
- Trader sold 116,000 420-strike calls and bought 430-strike calls on GLD
Gold has rallied 15% in August, on track for its best monthly gain since 2008, yet the biggest options bet of Monday hints at a potential pullback next.
Twenty minutes after the opening bell on Monday, someone sold nearly 116,000 420-strike calls in the SPDR Gold Shares ETF (GLD) expiring on September 18, which are were in-the-money, collecting a total premium of $202 million, according to a report by CNBC. Following this, trader used part of the proceeds to purchase the same number and expiry of 430-strike calls for $144 million, resulting a $58 million net credit.
This transaction is primarily a bearish bet on GLD in the short term. The trader sold $420 calls, which were already in the money, and bought $430 calls, putting the breakeven at around $425. With GLD near $427, the trade suggests the trader expects gold to pull back slightly over the next four weeks, the report said.
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The bearish stance on the precious metal comes in a week that includes major macroeconomic events including the release of PCE inflation on Wednesday and the Jackson Hole Economic Symposium in Wyoming scheduled to begin on Thursday.
Gold has been surging even as 10-year yields hit multiyear highs and real interest rates jump, which is typically considered to put pressure on the bullion, a nonyielding asset. The yellow metal stood around a three-month high, as traders weighed the US Treasury's next move in the bond market after the surprise intervention that's revived concerns around fiscal policy.
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The broader options market is bullish on GLD, but this unusually large trade is taking the opposite, bearish view, the report indicated.
On Monday, traders have bought around 37,000 calls in GLD, against less than 20,000 puts, the report said citing ThinkOrSwim data. In the top 15 contracts by volume, 13 were calls, SpotGamma data showed.
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