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Gold has been used as a currency, jewellery, and other decorative items for centuries. The metal is abundant enough that coins can be created but also rare enough so that it can only be produced selectively. The value of gold is derived from a combination of its rarity, usefulness, and beauty.

Many investors are interested in the gold market but don’t want to deal with the hassle and expense of buying and storing physical gold. One way to invest in gold without taking possession of it is by purchasing listed options on a gold ETF.

Listed options on gold ETFs

Gold exchange-traded funds (ETFs) offer investors exposure to the price of gold without having to buy and store physical bars or coins. Gold ETFs trade on major stock exchanges and can be bought and sold through brokers just like any other stock.

Listed options on gold ETFs can provide investors with a way to speculate on the price of gold or hedge against a decline in the metal price. Gold options allow investors to buy or sell shares of a gold ETF at a specific price on or before a certain date, but not necessarily.

Options on gold ETFs are available with both American- and European-style exercises. American-style options can be exercised anytime, including the expiration date, while traders can only exercise European-style options on the expiration date.

The two most popular gold ETFs are the SPDR Gold Trust (GLD) and the iShares Gold Trust (IAU). Both GLD and IAU offer listed options with American- and European-style exercises.

Gold futures contracts are also offered for trading on major exchanges such as the Chicago Mercantile Exchange (CME). Like options, futures give investors a way to speculate on the price of gold or hedge against a decline in the metal price. However, futures contracts also obligate the holder to buy or sell gold at a specific price on a specific date.

Benefits of trading gold ETFs

Investors interested in the gold market but don’t want to deal with the hassle and expense of buying and storing physical gold can consider trading gold ETFs. Gold ETFs offer exposure to the price of gold without having to take possession of the metal. Gold ETFs trade on major stock exchanges and can be bought and sold through brokers just like any other stock.

Listed options on gold ETFs can provide investors with a way to speculate on the price of gold or hedge against a decline in the metal price. Gold options allow investors to buy or sell shares of a gold ETF at a specific price on or before a certain date, but not necessarily.

Risks of trading gold ETFs

Investors should be aware of the risks involved in trading gold ETFs and options. Gold is a volatile commodity, and the price of gold can fluctuate rapidly. Traders should understand fully what they are investing in before they carry out trades, and therefore they must contact their ETF provider directly.

Why should UK traders invest in gold options?

The UK is one of the world’s largest markets for gold, with the London Bullion Market Association (LBMA) reporting that the city trades more than $13 trillion worth of gold each year. Listed options on gold ETFs can provide investors with a way to speculate on the price of gold or hedge against a decline in the metal price.

Conclusion

Novice traders interested in trading gold options should use an online broker that provides various benefits, like Saxo Bank. For more information on options and ETFs trading with Saxo, you can go to their site here.

 

Post Author: EDONS