From the July 2008 issue of Research Magazine • Subscribe!

July 1, 2008

GLD Gets Options

After a long four-year wait, trading of call and put options on the SPDR Gold Trust (GLD) has finally come to pass. The regulatory hurdles faced by both the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC) have been resolved.

Since gold is regulated by the CFTC (vs. securities, which are regulated by the SEC), GLD's hybrid nature complicated matters; this slowed down the process of listing options. Even though the trust's gold is held in a secured vault in the form of London Good Delivery Bars, GLD is still governed under the Securities Act of 1933.

Judging by the initial volume, trading in GLD options has been brisk. Put options with a strike price of $85 for the July expiration already had almost 4,000 outstanding option contracts.

(A call option is a contract that gives the holder the right to buy the underlying security at a specific price, i.e., strike price, within a certain time frame, while a put option provides the holder with the opposite benefit - the right to sell the underlying security at a specific price within a fixed period of time.)

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Ron DeLegge is the San Diego-based editor of www.etfguide.com.

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