The SPDR Gold Shares (GLD) has been consolidating and is currently showing signs of a potential bounce off its 150-day moving average, which serves as a support level. For those who prefer the 200-day moving average, that support is just below $400, aligning with the 50% Fibonacci retracement level.
A suggested trading strategy is the June $395/$445/$480 call spread risk reversal, which allows for a low-decay bullish position at a total net debit of $4.00 per contract, representing 1% of the current price. This strategy involves selling a lower strike put, which requires significant cash but is less capital-intensive than purchasing 100 shares of GLD directly.
The plan includes selling the June $395 put, buying the June $445 call, and selling the June $480 call. The immediate resistance is noted at $441, and by setting the long call strike at $445, the strategy avoids paying excessive premiums. The short $395 put is positioned around a key support level, making it a reasonable risk if GLD declines.
The strategy also takes advantage of "call skew," where out-of-the-money options become more expensive during times of geopolitical tension or inflation fears, allowing traders to subsidize the cost of the $445 call by selling the higher strike $480 calls.
Additionally, this approach reduces time decay risk, as selling both an out-of-the-money put and a higher-strike call mitigates the daily loss associated with holding long options. Overall, this risk reversal strategy ties up less capital than buying GLD stock at $433, while providing a defined upside and a buffer against downside risk, leveraging the dynamics of the options market effectively