The October 20 setup on SPDR Gold Trust (GLD) played out methodically despite opening against a gap-up that initially challenged the thesis.
GLD gapped higher on Monday, October 20—the day of entry—seemingly invalidating Friday’s Bearish Engulfing pattern at all-time highs. But that gap proved to be the final push. Price immediately stalled, failed to sustain above $378, and spent the rest of the week in choppy consolidation without threatening the 420/425 structure.
By Friday’s expiration, both legs expired worthless. The 10-delta positioning absorbed Monday’s spike and gave the spread room to work as overbought exhaustion took hold across all timeframes.
Trade Recap
Structure: Bear Call Spread
Expiration: Oct 24, 2025
Short Call: 420C (10 delta)
Long Call: 425C
Contracts: 20
Credit Received: $0.28 per contract
Broker Fees: –$23.27
Net P/L: +$537
👉 View on OptionStrat
👉 View in Trade Log
Post-mortem
This trade captured reversal exhaustion at multi-timeframe overbought extremes—even when the entry appeared mistimed.
→ Bearish Engulfing at ATH triggered the setup, signaling potential exhaustion despite Monday’s gap continuation.
→ 10-delta strike at 420 provided sufficient buffer against the gap-up, keeping the spread out-of-the-money throughout the week.
→ RSI extremes across daily, weekly, and monthly timeframes meant vertical momentum couldn’t sustain—price stalled immediately after the Monday open.
→ Consolidation through expiration allowed full premium decay without requiring a crash or reversal—just the absence of further extension.
Gold remains elevated but technically stretched. When multi-timeframe overbought conditions align with valid reversal patterns, 10-delta Bear Call Spreads at resistance offer high-probability setups. The key isn’t calling the exact top—it’s positioning far enough away that even brief continuation attempts don’t breach the short strike.
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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.