$GLD bulls score big in bullion

The SPDR Gold Trust has rebounded from multi-month lows in recent weeks, handing large gains to upside option traders.

On Dec. 6, Investitute’s proprietary programs flagged the purchase of 6,376 February $120 calls for $1.45 as part of a bullish spread with shares at $117.38. Open interest in the strike was only 845 contracts before that session began, showing that this was a new position.

Those calls traded for $3.10 today, more than twice their purchase price. The stock rose 3.64% in the same time period, illustrating the kind of leverage that can be achieved with options.

Long calls lock in the price where a stock can be purchased, gaining with a rally and providing leverage to the underlying shares. The contracts can quickly lose value if the stock stalls or pulls back but also carry less risk than owning the shares themselves.

GLD closed today up 0.07% to $121.33. The exchange-traded fund, which tracks the price of bullion, has risen as investors have returned to gold as a relative safe haven in market volatility.