GLD Analysis

SPDR Gold Shares (GLD)

Update 3/29/2018: GLD traced a non-trending course after I entered the position, until March 23, when it gapped to the upside and rose higher the day after, peaking just 12 cents below the Feb. 16 high.

In Elliott wave terms, that movement could be seen as the 1st wave of an uptrend, and the drop down in two subsequent days as a 2nd wave correction, allowing for a bullish interpretation that was contrary to the direction of my position.

The presumed 2nd-wave decline made the position profitable, and I cashed out at 21.7% of maximum potential profit, below my 50% target but still a reasonable gain.

The options went for a $0.72 debit with shares at $125.46. The shares movement was 0.2% over 29 days for a +2% annual rate. The options position produced a 30.6% return for a 385% annual rate.

I have entered a short vertical spread on GLD, using options that trade for the last time 51 days hence, on April 20. The premium is a $0.94 credit and the stock at the time of entry was priced at $125.24.

I made the decision to enter the trade in my account based on a bearish Elliott wave count and an ongoing downtrend signaled by the Fisher Transform metric..

Implied volatility stands at 12%, which is 3/5ths of the VIX, a measure of the volatility of the S&P 500 index.

GLD’s IV stands higher than 32% of its daily readings over the past year and stands in the 33rd percentile of its most recent broad movement..

The price used for analysis was $125.19.

Premium: $0.94 Expire OTM  
GLD-bear call spread Strike Odds Delta
Long 129.00 55.4% 46
Break-even 125.06 65.7% 36
Short 126.00 75.9% 25

The premium is 62.7% of the width of the position’s wings.

The risk/reward ratio is 2.2:1.

The bid/ask spread was 2.1%.

By Tim Bovee, Portland, Oregon, Feb. 28, 2018


Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.

No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decisions for his or her own account, and take responsibility for the consequences.

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