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drbubb

USING OPTIONS to Trade GOLD Price Risk

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USING OPTIONS to Trade GOLD Price Risk... 

The following is from a chat I have on Viber.  It may be beyond the experience of some here who may not have traded options or even have though of trading options.  Yet these are powerful tools, which provide gearing, and the ability to generate profits when markets are falling.

I will show how I have been able to generate a near 40% return in 29 days, using Put and Call options, while Gold corrected from $2089 to $1919, -8%.

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While Gold was falling 8%, the Junior Gold stock index (GDXJ) fell from $65.95 to $55.11, -16.4%... update

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USING E-WAVES to trade Options on Gold Stocks

Trades over 29 days during Gold's correction:
WAVE— : NearH:  High :  wv. A / wv. B / wv. C?:
Date. — : 07.27  : 08.02 :  08.11 : 08.18 : 08.25 : CHG.:
GDXJ — $62.58 / 64.05 / 55.19/ 60.71 / 55.70 : -11.0%
Sep.63P: $5.70  / $4.00 / $9.00/ $5.50/ $7.85 : +37.7%
Sep.56P: $0.00  / $0.00 / $3.90/ $0.00/ $3.00 :
DUST - : $16.77 /  16.07 / 20.45/ 16.84/ 19.05 : +13.6%
Sep.15C: $3.00  / $2.60 / $4.70/ $2.35/ $4.20: +40.0%

NOTES:
+ I bought my Puts a little soon, at the Near High on 7/27 rather than the actual High on 8/02.  Paid $5.70 for GDXJ $63P and $3.00 for DUST $15C. Did both as an experiment to see which option would generate better profits. Ultimately profits were pretty similar at 38-40% what I invested.  Had the drop been bigger, Dust (3x Bear) might Have out-performed the GDXJ options, because of size rebalancing.
+ Instead of $5.70, might have had the Puts at just $4.00 on 8/02
+ As the GDXJ price fell into the wave A low, I sold $56P at $3.90 against My higher strike puts, betting that time decay might give me  a profit. In hindsight, it would have been better to sell the 63P at the Day’s high near $9.00, and sell the DUST calls at $4.70. (Of course, I could not know that at the time.)
+ When Gold and GDXJ rose to wave B high, I used the proceeds from the Puts sold short, to buy more GDXJ puts at $5.50
+ The wave C low was easier to call with higher probability. At/near the wave A low, so I sold out of all my options a little over the GDXJ low of $55.10 and a little below DUST high of $19.31

HAD I not sold out, closing levels on Tuesday were:
GDXJ: $56.90 / 63P: $7.00. (+23% vs $5.70 cost)
DUST: $18.42 / 15C: $3.70. (+23% vs $3.00 cost)
====

Bullion banks "expect Low at $1890. another at $1900." My feeling now is: at least 50% chance the low is already in place.  If not, I may buy more Gold shares on a further dip. 

No good reason to mess with Gold now.  The shares provide better gearing, I reckon.  Of course, the banks will not tell you what I am telling you because "they have gold to sell you."  I just want to build an honest and mutually beneficial discussion here. haha

 

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Wave C Low in place?

GLD & GDXJ are up. Stilll looking like we have seen the Low.  Next part is hard, getting thru 60.  Now: 58.26 +1.36

Headline about Yesterday's drop was:

Gold price weighed down by strong rise in U.S. durable goods

Kitco News

(today):

Investors jump into gold, price up 1% as tensions between China and ...

Kitco News

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