GLD Options - Big Bearish Bet on Gold

Discussion in 'Trading' started by livevol_ophir, Jan 12, 2010.

  1. livevol_ophir

    livevol_ophir ET Sponsor

    A large bearish bet was just put up in the Sep options.

    The company has traded over 239,000 options today in the first 2 hours on total daily average option volume of 228,592.

    The biggest trade of the day accounts for 80,000 contracts. Someone bought 20,000 Sep 60/75/90 butterflies with the puts and paid 1.50 + 0.19 - 2*(0.35) = 0.99. Total outlay is 20000*100*$0.99 = $1,980,000.

    It's $2 million bet (max loss) to win $28 million (max gain). If you think the odds are better than the sum of the total area of positive pnl, then it's a bet with theoretical edge.

    Max gain occurs with GLD going to 75.

    You can see trades, prices, details, charts and pnl payouts on my blog here:
    http://livevol.blogspot.com/2010/01/spdr-gold-shares-gld-bearish-butterfly.html