One big investor is turning to gold as dysfunction grips
optionMONSTER's Heat Seeker monitoring system detected the purchase
of 10,000 December 132 calls in the SPDR Gold Shares
exchange-traded fund for an average premium $3.125. Equal-sized
blocks were sold in the December 124 puts for $3.27 and the
December 138 calls for $1.47. Volume exceeded open interest at all
three strikes, indicating that new positions were initiated.
The trader collected a net credit of $1.62 and stands to gain $6 if
the GLD closes at or above $138 on expiration. He or she is also on
the hook to buy shares for $124 if it closes below that level on
expiration, so there is downside risk.
The GLD, which represents about one-tenth of a bullion ounce, is
down 0.29 percent to $128.60 in afternoon trading. The fund
declined steadily between October 2012 and last June but has been
working its way higher since.
Republicans and Democrats are locking horns over the federal
budget, which must be approved by tomorrow to avert a government
shutdown. They also face a second battle later in October, when
they'll have to raise the country's debt ceiling or risk leaving
the Treasury Department unable to make payments.
Gold has traditionally been a hedge against political risk, a view
that today's investor is apparently adopting. The strategy lets him
or her benefit from an immediate rally while programming a buy
order at lower prices if it drops. (See our
section for more on the trade, which combines
vertical call spread
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