Bill Gross has mentioned recently that Ben Bernanke will deliver QE3, and, perhaps, QE4 and QE5. One GLD options trader bets that QE3 will push the GLD to at least $185 by mid-July.
GLD has erased 7% over the last month, and dropped 0.1% to $161.28 on Thursday, as the lack of a third round of Federal Reserve monetary easing damps demand. The ETF is off nearly 13% since hitting $184.59--the ETF's all-time high--on Aug. 22.
"It looks like they are thinking GLD will make a new high around July expiration," said Todd Salamone, director of research at Schaeffer's Investment Research. "It could be someone expecting a breakout and betting on QE3 by July."
The trader set up a strategy known as a "debit spread" on Gold Trust options, according to Salamone, buying 20,000 July $185 calls, while selling 20,000 $210 calls of the same expiration. The strategy, which has a break-even at about $185.70, requires the ETF's shares to jump 15% by July 16.
The trader maximizes profit at nearly $50 million before commissions and fees if the shares rise 30% to trade at $210 by July expiration.
Gold posted a record of $1,925 an ounce in the New York futures market last September, went into consolidation phase and finished at $1,652 an ounce Friday.
Less than four weeks earlier, gold had tumbled--shedding almost $100 an ounce in a single day--as a statement about the economic outlook from the Fed's rate-setting committee undermined hope for further easing. On Monday, Bernanke gave gold a boost, saying the U.S. labor market was still unstable--a comment some market watchers interpreted as a sign that he had left the door open for QE3.
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