Big Printin’ – GLD, XLV

by Dan March 13, 2017 4:21 pm • Big Printin'

Te etf that tracks gold, GLD, has had a tough couple weeks, down about 5%, since being rejected on Feb 27th at its downtrend from the 52-week highs made this summer, now just below mild technical support at $115:

GLD 1yr chart from Bloomberg

There was a trade in the options market that caught my eye when the etf was trading $114,78 a trader bought the GLD apr 114-116 strangle (buying the 114 put and the 116 call) 3000 times for 2.72. If this was opening then it would appear that the trader is playing for at least a $2.72 move from current levels, a decline below $111.28, or a rally above $118.72, or about 2.5% in the next month or so.  What you may ask could catalyze a move back towards the downtrend or a continuation of recent weakness? Obviously the pace of the FOMC expected rate increases and its effects on the U.S. dollar which most of the time will trade inversely to gold.

Also in the XLV, the S&P healthcare etf there was what appears to be a massive bullish roll when the etf was trading $75.75, a trader sold to close 83,000 March 76 calls at 27 cents and bought to open 105,000 April 77 Calls for 55 cents, or $5.775 million in premium. The new call position, assuming an outright bullish bet break-even at 77.55, up 2.4% from the trading level.  $76 is a fairly important technical level to my eye:

XL 1yr chart from Bloomberg

Here were our thoughts and trade idea from last week on the XLV (Health Scare).