ETF sees a showdown between bulls and bears, is gold's "decisive moment" approaching?
Has gold lost its luster?
According to CNBC, bulls and bears are fiercely clashing in the options trading pool of an exchange-traded fund (ETF) that is seeking to reverse the prolonged downturn in this commodity.
On Tuesday, options trading volumes for both the SPDR Gold ETF (GLD) and VanEck Gold Miners ETF (GDX) leaned toward the bullish side. Even though gold futures prices declined that day, GDX still surged by more than 4%. Bullish inflows on GDX were especially strong, with intraday call option volume exceeding put option volume by more than five times.
According to ThinkOrSwim data, over 10,000 call options on GDX were traded at or above the asking price, implying those options were likely purchased aggressively by investors. In comparison, only 4,400 put options were bought.
According to SpotGamma, the contracts with the highest trading volume were calls expiring on June 18, with strike prices of $100 and $110. These call options require gold prices to surge by double-digit percentages from their current level just to reach breakeven.
However, in the same GDX options market, a much larger trader does not believe this scenario will unfold.
The largest single premium trade of the day involved someone spending over $1 million—more than the combined premiums to buy those $100 and $110 strike calls—to purchase several thousand July 17 expiry puts with a strike price of $85.
These two opposing trades offer a perspective on the potentially decisive moment facing gold. The current geopolitical situation remains unpredictable, and the interest rate outlook is equally unclear. Gold prices have dropped nearly 20% from their January all-time highs, but are still up 89% over the past two years. By comparison, gold mining stocks have gained 144% over the same period.
Those searching for other clues might find answers in options trading for gold miner Newmont Mining.
According to SpotGamma, the company’s option activity approached 100,000 contracts on Tuesday, with total option premiums near $500 million. The trading was clearly tilted bearish, including millions of dollars worth of call selling. One of the day’s largest trades was a deep in-the-money call sale worth $22 million, typically interpreted as a signal that someone is exiting a stock position.
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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