$GLD call buyers post 300% profit

Bullish option traders have scored big in the SPDR Gold Shares Fund, which has risen as investors have sought protection in the precious metal.

On Aug. 9, Investitute’s proprietary programs found that 24,400 October $131 calls were purchased for $0.35 to $0.37 with shares at $120.84. These were clearly new positions, as open interest in the strike was a mere 62 contracts before the activity appeared.

Those calls traded for $1.42 this afternoon, representing an average profit of 300 percent. The stock was up just 5.7 percent in the same time period, showing how options can far outperform their underlying shares.

Long calls lock in the price where investors can buy a stock, letting them position for a rally at limited cost with the potential for significant leverage. They carry less risk than owning shares because the most that can be lost is the price of the options no matter how far the stock might fall.

GLD rose 1.11 percent to $127.46 today. The exchange-traded fund has rallied with the price of gold at one-year highs amid heightened geopolitical tensions with North Korea.