If you’ve been watching the SPDR Gold Shares (GLD), you know the yellow metal has been consolidating and appears to be bouncing off its 150-day moving average (support). If one prefers to use the 200-day moving average, that support level is just below $400, which is also approximately the 50% Fibonacci retracement level.
Here’s how to trade the technical setup: the June $395/$445/$480 call spread risk reversal.
SPDR Gold (GLD), YTD
This strategy provides a low-decay bullish play for a total net debit of just $4.00 per contract, or 1% of the current price. Of course, selling that lower strike put will tie up a lot of cash, but less so than simply buying 100 shares of GLD.
- Sell the June $395 Put
- Buy the June $445 Call
- Sell the June $480 Call
- Skill level: Advanced
Why This Strategy Wins
- Structured Around Key Technical Levels: We see immediate resistance at $441. By placing our long call strike at $445, we aren’t paying for “hopium” premium. Instead, we use a call spread to mitigate the immediate resistance barrier. Meanwhile, that short $395 put sits comfortably around our lower support level. If GLD drops, $395 is a level one might consider starting to add to one’s positions. By selling that put, we take that risk, but it’s an acceptable one.
- Weaponizing “Call Skew”: Gold and other commodities play by different rules regarding options prices than equities typically do. For stock options, puts generally trade at a premium to at-the-money options and out-of-the-money calls. With commodities, when geopolitical tensions or inflation fears spike, investors often scramble for upside calls, making out-of-the-money options expensive relative to at-the-money options. By selling the higher strike $480 calls, we exploit this “call skew” to heavily subsidize the cost of our $445 upside exposure.
- The Theta Sleep-Easy Factor: Pure long options positions bleed money every day you wait for the move. Because we are selling both an out-of-the-money put and a higher-strike call, we drastically reduce our time decay (theta). Time is no longer your enemy.
The risk reversal will tie up slightly less capital than buying GLD stock at $433, lets you capture a massive chunk of the anticipated “gold rush” for next to no premium outlay. You get defined, subsidized upside, and a meaningful buffer on the downside, and a trade that works with the dynamics of the options market, not against it.
Get long, use the skew, and let the 150-day moving average do the heavy lifting.
