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Traders Accumulate Large Positions in SPDR Gold Trust Options

Gary Wagner

Monday February 27, 2017 18:03

http://www.kitco.com/commentaries/2017-02-27/Traders-Accumulate-Large-Positions-in-SPDR-Gold-Trust-Options.html

(Kitco News) -One of CNBC’s Halftime Reports today was titled, “Bulls Rush Into Gold.” In this report, traders John and Pete Najarian spoke about the unusual activity in gold trust options.

According to Pete Najarian, traders are buying the September 127 call options on the SPDR gold trust with a vengeance. “You know GLD. We’ve seen activity. It started back in December. Then we had some more at the very beginning of February. They were buying out till April. Now, they’re going all the way out to September. The September 127 calls aggressively bought today. 20,000 of those bought today in the GLD.”

Traders who are accumulating these options are anticipating a major extended rally in gold, which should continue throughout the rest of the year. Also, based upon the fact that open interest on this call option was just around the 170 contracts prior to today’s buying frenzy, this is new activity rather than any offsetting of existing positions.

Whatever the case may be, the fact that so many contracts were accumulated on a single day is unusual. More so, the fact that this massive accumulation is taking place one day prior to President Donald Trump’s address to Congress is noteworthy and possibly connected.



Trump Prepares to Address Congress on Tuesday

Tomorrow’s speech by President Trump to Congress is not a State of the Union speech. That can only come after a full year in office. However, according to Bloomberg News, tomorrow’s address is taking on the importance of a State of the Union speech when it comes to US financial markets.

“For investors relying on more than a year of campaign promises of a pro-growth agenda to push U.S. stocks to record highs, the dollar surging and bond yields climbing, the prime-time speech to House and Senate lawmakers couldn’t come any sooner.”

Tomorrow’s address will lay out critical proposals, including his first budget plan in which he will propose spending 54 billion on defense.

According to Tobias Levkovich, Citigroup Inc.’s chief U.S. equity strategist, “Fears of a major pullback if President Trump does not outline a ‘phenomenal’ tax program on Feb. 28th may be overdone.”

No matter the outcome of tomorrow’s address, there is a real likelihood that President Trump’s statements could increase the volatility in US equities, which has been surprisingly absent from this recent rally. As such, we could also see tomorrow’s address create an increase in bullish sentiment for safe haven investments such as gold. According to Pete Najarian of CNBC, this sentiment has already started today.

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Wishing you as always, good trading,


By Gary Wagner

Contributing to kitco.com