Gold Futures Options

Gold and Silver futures order books have been less liquid and these markets have been more difficult to trade. The debasement trade seems to persist. We focus on algorithmic short-term trading but find low risk, high payoff asymmetric options trades interesting.

Here is a graphic I have seen several times showing the open interest on out of the money Gold call options for December 2026 at the strike price of 20,000. Gold would have to go up 400% to hit 20,000. In normal times, the odds of this happening are 0%. Even now, the odds are 0%.

The discussion was based on long the 15,000 Call and short the 20,000 Call. The current price for this option based on my quotes is $1,600. If Gold traded above 20,000 at expiration, the payoff would be $500,000.

This is more of a discretionary gamble but one could make the case that it is a "high convexity hedge".

Another option that is closer to the money but would still require that the price of Gold would double is the 7,500/10,000 Bull Call in December. the price of this is approximately $5,000 with a payoff of $250,000 if Gold expires above 10,000 in December.

If Gold trades above these strike prices before expiration, depending on the time until expiration, the payoff would be less.

Here is an example in Interactive Brokers of the 7500/10000 December Bull Call spread. The dotted line shows the payoff for the option on the y-axis based on the price of Gold on the x-axis based on the current date of February 20, 2026.

The October 1, 2026 shows a steeper dotted line.

The expiration for the December call options is November 24, 2026. On expiration, the dotted line completely overlaps the solid white line. The dropdown for the different dates is in the upper right corner. The Profit Probability is 4.9%. The Max Loss is based on the offer and not the mid point between the bid and the offer which is closer to $5,000.

This is not a trade I have taken but find interesting.