Trade the SPDR Gold Trust (ETF) (GLD) for Greenbacks

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Gold futures are attacking $1,300 in early Tuesday trading, and the SPDR Gold Trust (ETF) (NYSEARCA:GLD) is responding in kind. With GLD getting uppity once more, the time is ripe for some yellow metal analysis.

Trade the SPDR Gold Trust (ETF) (GLD) for Greenbacks

Since the gold ETF is the go-to vehicle for retail equity and options traders, we’ll use that for our commentary.

On a side note, the price chart of gold futures and GLD are virtually identical aside from one glaring difference — gaps. Since this gold ETF trades during the regular trading hours of the equity market, it has to jump up or down each day to catch-up with whatever happened to gold futures overnight.

Like today, for example. The yellow metal rallied 1% overnight, so GLD opened 1% higher right off the bat.

The budding ascent for gold prices has carried GLD back above all its major moving averages. Bulls would say order has been restored in the world of precious metals. They’re trending higher as the market gods intended.

GLD ETF chart
Click to Enlarge
Source: OptionsAnalytix

Year-to-date, the gold ETF is up 12%. There’s no doubt it has been the beneficiary of the dollar’s recent drubbing. The entirety of the greenback’s post-election gains have been lost. Continued weakness should keep gold prices aloft.

Profits Await in the GLD Mine

With implied volatility in the gutter, gold options are cheap. This suggests a long premium play is the way to go, particularly if you’re looking to swing for the fence. Buy the Aug $122/$127 call spread for around $1.90.

The strategy consists of buying to open the Aug $122 call while selling to open the Aug $127 call. It positions you to more than double your money if the gold fund continues rising through August. The initial debit of $1.90 represents the max loss and will be forfeited if GLD sits below $122 at expiration.

If the ETF sits above $127 at expiration, you will capture the max gain of $3.10.

As of this writing, Tyler Craig did not hold a position in any of the aforementioned securities.

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Article printed from InvestorPlace Media, https://investorplace.com/2017/06/trade-gold-for-greenbacks-with-spdr-gold-trust-etf-gld/.

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