Gold bullion bulls seek new trading range
HESITANT ON CALLS
“People are playing gold as a trade this time and are not using gold as a risk-off position or a currency hedge,” said Joe Cusick, senior market analyst at Chicago-based online brokerage firm optionsXpress. “The overall trend has definitely shifted into the bearish camp. Instead of buying the underlining shares of these miner ETFs, traders are using call options as a proxy to capture near-term upside.”
On the put side, volume in the GLD on Wednesday was the largest since September 23. About 324,000 puts and 280,000 calls changed hands in the GLD, nearly triple the average daily turnover, according to options analytics firm Trade alert.
The put traffic consisted of spreads, the rolling of positions before December expiration on Friday and a large straddle sale, that looked for GLD prices to be range-bound by January expiration.
Gold had attracted a lot of speculative momentum traders as it went up since late 2008, Luby said.
Past price corrections often triggered buying of out-of-the-money calls on gold-related products on the expectations that prices would relentlessly march higher.
“This time gold came down so severely that I think that people are reassessing as to what their proper holdings should be in gold and may have stopped some of the speculators who bought call options without thinking,” said TD Ameritrade chief derivatives strategist J.J. Kinahan.
“Now those who are trading gold are more serious traders using all different strategies rather than just buying out-of-the-money calls in gold products,” Kinahan said. – Reuters
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