NEW YORK – The gold options market saw $1.75-million in block trades betting the precious metal could almost triple in more than a year, surpassing the record.
Around noon in New York Wednesday, 5 000 lots of a gold option giving the holder the right to buy the precious metal at $4 000/oz in June 2021 changed hands. The bets were sold at $3.50/oz.
“It’s like 18-month term life insurance; what will the world look like if gold is at $4 000,” Tai Wong, the head of metals derivatives trading at BMO Capital Markets, said in an email. “They are hoping for a quick violent move,” he said, referring to the people who bought the call options.
Gold futures climbed to a record $1 923.70/oz in 2011 as the Federal Reserve bought more than $2-trillion of debt to stimulate the US economy. While bullion has rallied 14% this year, the precious metal is still 24% below the current all-time high.
Bullion for delivery in February settled at $1 460.80/oz at 1:33 p.m. in New York. Futures for June 2021 delivery, which settled at $1 494.40 on Wednesday, will need to almost triple before expiration to make the call options profitable for its holder.