$GLD pays off for call buyers

It has taken barely a week for option traders to nearly double their money in the SPDR Gold Trust.

On Oct. 5, Investitute’s proprietary programs cited the purchase of 3,000 January $116 calls in one print for $1.80 as part of a bullish spread with shares at $113.73. Volume was above the strike’s open interest of 2,921 contracts, showing that it was a new position.

Those calls traded for $3.23 today, almost twice their purchase price. The stock rose 2.37% in the same time frame, 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 was up 0.67% today to close at $116 even. The exchange-traded fund, which tracks the price of gold, has risen apparently as a save-haven play as equities have fallen.