Someone Bet $5.9 Million That GLD Closes Over $121.18 By June 19

This strategy is this is not a ‘slow drift higher’ type of strategy,” she said. “If GLD were to just drift higher, these options are going to decay away and they are not worth nearly as much. This is a strategy that you would typically use if you were protecting a short position—you are afraid of a huge pop to the upside—or you’re trying to look bullish and again looking for that pop to the upside.  – Stacey Gilbert, Susquehanna Group (from CNBC article)

CNBC reported that a $5.9 call option bet was place on GLD 120-strike options which expire June 19.  Including the $1.18 per call premium, the trader is betting that GLD will close above $121.18 on or before expiration.  That’s a 5% jump in price by then.

GLD

For every dollar above $121.18 at expiration that GLD might close, the trader will make $50,000.  However, if gold moves up 5-10% well before then, which is quite possible.  The trader will make a lot more because the call options will “swell” up in value with volatility premium.

While the young lady from Susquehanna has suggested that this might be “hedge” against a short position in GLD, I think it would be more probable that a hedge play using publicly traded options would involve shorting near or out of the money puts.  That’s what I would do, anyway, because shorting puts enables the hedger to take in cash upfront, rather than spend cash.

This is a speculative play by someone who has strong conviction that Fed will not raise rates at the June FOMC.  But not only that, the trader is betting that the market will start to price in the probability that the Fed won’t raise rates at all this year.  It’s also a sizeable bet that the dollar will tank.

 

7 thoughts on “Someone Bet $5.9 Million That GLD Closes Over $121.18 By June 19

  1. I read another article that stated this entity was short gold and this was a protective position. Nonetheless its a big dollar bet so there are not many players who could do this.

    Then why not sell a gld put to pay for the trade? This entity is likely playing with opm anyway.

  2. Thanks for keeping us in the loop. Keep rocking them out Dave! What a coincidence that AU/AG wacked on OTC options expiration day.
    I feel that the markets are now 101% manipulated and the PPT and friends are barely keeping this shit-filled barge afloat.
    I will sink soon…

  3. My call is that there will be zero chance that Yellen will raise rates. Why raise rates? It’ll not be to attract capital to the ‘safe haven’ of the US. Offshore funds will continue to flow to the US when trillions of bonds are NIRP or zero return and capital confiscations continue in Greece and Switzerland. Yellen could do nothing for a year and the dollar and UST bonds would be attractive.
    That GLD bet is going to lose as gold and silver will continue to drop this year. PM price drops will be directly attributed to a severe market crash that will pull down all asset classes including stocks, real estate, bonds and precious metals as people, banks, central banks and sovereigns sell to meet margin calls that we far in excess of $10 trillion or more. The market crash could happen tomorrow but more likely come later in the year. It will make Lehman look like a popcorn fart. It will leave everyone damaged beyond belief as there will be no safe haven. Everyone will take licking.

  4. Dave–I was saying something different–buy the calls and pay for them by selling puts-which is more bullish-I think you were saying just sell the puts and take in $$ which is a strategy I like a lot when a sector or stock is testing the bottom. Lord knows metals are testing the bottom.

    You know the different drills. I guess for that entity, if they were hedging a short position, then just buying calls works. But its still big money doing it.

  5. I see this scheme and tactic…not because of Fed rates … but because of the Russia China Gold Standard which speculators will bet will happen before 2016…the AIIBank is the new System— free from the Western System fraud, et al

Leave a Reply

Your email address will not be published. Required fields are marked *

Time limit is exhausted. Please reload CAPTCHA.