SPDR Gold Trust (GLD) ripped into extreme overbought territory, with RSI stretched above 78 and a textbook bearish reversal candle appearing on massive volume. The rally carried far above moving averages, leaving price extended and vulnerable to mean reversion.
📉 Relentless uptrend hits exhaustion. Volume confirms the shift.
Setup Selection
The daily chart shows GLD accelerating sharply into overbought readings. RSI confirms overheating at 78.20. Volume on the reversal day spiked well above the 50-day average — and it was bearish.
The candle itself? Nearly a perfect Bearish Engulfing — the kind of signal I wait for.
Price is stretched far from EMA-12, sitting around $375. That’s my target zone for pullback.
This time I didn’t use my standard Bear Call Credit Spread. I went directional with a Bear Put Spread — paying a debit to bet on the move down.
Why Bear Put Spread?
→ Directional bet on pullback to support
→ Defined risk, capped loss
→ Profits if GLD retraces toward $375 (EMA-12 zone)
The setup doesn’t require gold to crash — just a normal pullback after overextension.
Trade Structure
Expiration: October 31, 2025
Sold PUT: 386
Bought PUT: 391
Contracts: 4
Net Debit: $956 (total position)
Max Profit: $1,044
Target: GLD pulls back to ~$375
👉 View on OptionStrat
👉 View in Trade Log
Entry and Exit Plan
Position opened Friday, October 17, after the bearish engulfing candle confirmed.
→ If GLD drops to $375 and stays there closer to expiration, profit approaches max ($1,044). The later it happens, the better.
→ If GLD doesn’t move down as expected, I’ll hold near expiration and exit based on the situation — either with a small gain or a controlled loss.
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Disclaimer
All content is for informational purposes only and does not constitute financial advice.Any trades or strategies should be tested in a simulated environment before use.Trading involves risk, and all decisions are the sole responsibility of the reader.
The choice of bear put rather than bear call spread is because whatever elevation currently exists in volatility is evenly distributed among the legs, so paying or collecting premium is fairly neutral, and should it violently react against you the loss is capped, right? Assume you plan to hold for days/weeks but definitely exit prior to expiry? Or at what point would you consider rolling out/down if it's working?