Gold caught some action and is holding $1,200 following the Fed circus, as the drop in bond yields weakened the U.S. dollar. This sparked interest in the yellow metal, as gold cleared its 50-day and 100-day moving averages (MAs). These two MAs had been curling lower but are trying to flatten out, with additional resistance at $1,210 and the 200-day moving average. A close above $1,210 would be bullish for a possible run to $1,230-$1,240. While a mini-trading range has formed since mid-March, there is still risk to $1,170-$1,150 if $1,200-$1,190 fails to hold.

With the recent trading range, it is a little too risky to go all-in on a long or short position on gold. However, here is how we may want to profit from a possible breakout or breakdown from here.

One could use the SPDR Gold Trust ETF (GLD) to play a bullish breakout in gold on a move above $1,210 with the GLD July 117 calls (GLD150717C00117000). I mentioned that the safer trade may be waiting for $1,210 to clear, but aggressive traders could use these call options if $115-$114.50 holds on the GLD shares.

For a bearish trade, if gold cracks $1,190, or GLD shares fall below $114.50, speculative traders could use the GLD July 113 puts (GLD150717P00113000).

But the safer trade that I recommend is to buy both the GLD calls and puts at current levels. The aforementioned options, together, could also be used to create a strangle option trade. With both options priced near $0.75, shares of GLD would need to clear $118.50-$119 over the near term, or fall below $111-$110, to make a decent profit.

I usually don’t recommend too many exchange-traded fund (ETF) option trades. Instead, I like to play individual stocks, as they have more momentum. Additionally, the bid/ask prices on ETFs can be wider at a dime or more, and I like to trade options with a spread of a nickel or less. However, GLD options have relatively decent bid/ask spreads and are pretty liquid, meaning they are easy to get into and out of.

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