Gold and Silver Mining Stocks Message Board

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Gold/Mining/Energy : Gold and Silver Mining Stocks

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To: IngotWeTrust who wrote (3570)	11/27/2002 8:27:35 AM
From: the-phoenix	Read Replies (2) of 4051

Here is a gold trading strategy that I am thinking about: Given the strong inverse relationship between gold and the stock market: sharelynx.net generally if one goes up the other goes down. It seems this relationship could be exploited with options. Example: Buy December Out of the Money Puts on XAU and QQQ. If you buy the XAU 60s and the QQQ 26s, your cost might be around $200 a pair right now. So if gold rallies and the market falls, you break even at QQQ 24 and make $200 profit (100%) at QQQ 22. Alternatively, if stocks rally and gold keeps falling, you break even at XAU 58 and make $200 profit (100%) at XAU 56. The strategy can be quite profitable if a fairly large move is expected in either market. It is similar to a straddle. Comments?

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