update: "The trade is no longer "directional" but, volatility itself."
A few weeks ago I talked about the risk:reward trade
in gold and gold stocks no longer being directional,
but on volatility itself...
Message 24220142
""The trade is no longer "directional" but, volatility itself."
And volatile has been an understatement - be it in gold,
in the DOW, the Naz, the S&P, or in international markets.
We're seeing 5%+ moves (equivalent to 600+ point move
in the DOW) in international indices weekly, if not daily.
When risk and fear get repriced to these levels,
use it to your advanatage. While put premiums have gotten
so rich - that it makes it buying insurance, or putting
on a short sided option trade very expensive. The flip side,
is that it makes selling puts equally as rewarding.
If you still believe in the underlying fundamentals of
gold and gold stocks... use these rich premiums on puts
to your advantage, collect them as income, and use them
as a discounting cushion to fund your re-entries on the
pullbacks.
Here's my "floating options strangle" chart. We've
finally closed below the HUI 434 "money line." The
next support levels are the former HUI high of 401,
and our old friend... HUI 370 - long term key support,
which is also where we find the HUI's 200 dma.
Merrill is already calling for another "emergency" Fed
rate cut. Unemployment is set to soar. Both the manufacturing
and the service economies are rolling over and housing
is still dead as a door-nail.
Did you see the CNBC interview yesterday with homebuilder
Centex's CEO?
...they need to keep sharp objects away from that guy,
gloom & doom would be a happy spin on his analysis.
While the time has passed to have already skated
to where the puck is now going... you can still use
"put sales" as a simple and easy to use,
low risk:high reward tool to fund your re-entry,
and to pick up some nice income.
Be careful out there... and be patient.
And remember - never interrupt the enemy while
he's making a mistake.
Mo later,
S.O.T.B. |
