Tuesday, January 12, 2010

SPDR Gold Shares (GLD) - Bearish Butterfly

GLD is trading ~112.91. The LIVEVOL™ Pro Summary is below. 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 Company Tab snapshot is below (click the image to enlarge).

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. The day's biggest trades and Options Tab snaphots are included below (click either image to enlarge). Max gain occurs if GLD goes to $75.

The PnL chart for this trade is included below.

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.

The underlying and vol chart is included below for reference.

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