re: ["do you see Gold down to $865, or there about?
What first POG over 1000 or under 900"]
Eva, Gold is still comfortably within it's bullish uptrend,
and you have to stay long until it breaks support.
The underlying fundamentals are so strong given what Central
Banks are doing, and what they plan to do...
sliderontheblack.com
...that we just need to weather this storm, as we lose some
momentum players who have rotated to the broad market, and
deeply over-sold plays in oil, and energy.
Earlier in this cycle gold was trading along with the CRB,
and Oil... riding the commodity wave. But presently, gold
is clearly trading as money...
And as the only sane and sound alternative, in a world of
insane central bankers, and unsound fiscal and financial
policy.
Concerning your question about gold going sub $900, or over
$1000...
What would you say if I said... that it doesn't matter!
...because that's not "the trade" you should be making
on gold right now.
How's that for an answer <vbg>?
And here's what I mean...
I've expressed the opinion here before, that the "Looters"
are not as concerned with the message that $1000 Gold sends,
as they are desirous of smacking it down hard one more time,
before the "Global New Deal" is unleashed... so they can
accumulate more.
It would actually be positive for the message that they are
trying to convey, for Gold to be a little over $1000,
because they want the masses to have some confidence that
their reflationary efforts are working and that the world is
not collapsing into a deflationary abyss.
The trade you need to be making here, should be on "volatility"
itself and not "direction."
Take what the market gives you...
And it's giving you a volatility trade imho, as we have Central
Banks about to enter unchartered QE/Monetary Policy territory,
against the backdrop of a concerted smackdown and and still
declining economic and broad market fundamentals....as well
as the potential of an IMF gold dump.
So what we have, is "extreme" possibilities in both directions.
And what's our favorite trade when volatility is the flav' du jour?
... long option strangles and/or straddles.
In "this environment" I'm not trying to trade the daily
oscillations as gold moves from $875 to $950 here.
I want insurance (and a profit) sub $850-875....and I want
levered upside to $1050+ gold.
For those not familiar with option strangles and straddles,
this is from RedOption.com...
"Strangles, Straddles, Butterflies & Condors"
The names “straddle” and “strangle” may give you clues about
these option positions. Like your favorite politician trying
to win both Democratic and Republican votes, these positions
are on both sides of the issue.
Long straddles and strangles make money if the stock price
moves up or down significantly.
Who cares which way the stock goes, so long as it GOES!
Straddles and strangles are essentially speculations on
whether the price of the stock will move a lot or not or
implied volatility is going to go up or down.
If you think the stock is going to move big in one direction
or another and/or if you think implied volatility is going to
rise, you would buy a straddle or strangle. If you think the
stock is going to sit still or not move very much and/or
if you think implied volatility is going to fall, you would
sell short a straddle or strangle.
A long straddle is long 1 call and long 1 put at the same
strike price and expiration and on the same stock.
A long strangle is long 1 call at a higher strike and long 1 put
at a lower strike in the same expiration and on the same stock.
Such a position makes money if the stock price moves up or
down well past the strike prices of the strangle.
Long straddles and strangles have limited risk but unlimited
profit potential.
The simplest reason to buy straddles and strangles is that
they manufacture long deltas if the underlying stock rallies,
and short deltas if the underlying stock falls. Long deltas on
the way up and short deltas on the way down?
What’s the catch?
Straddles and strangles can be expensive to buy, and if the
stock price just sits there, or moves very little, losses can
be large.
A short straddle is short 1 call and short 1 put at the same
strike price and expiration and on the same stock. A short
strangle is short 1 call at a higher strike and short 1 put
at a lower strike in the same expiration and on the same
stock. Such a position makes money if the stock price stays at
the strike of the straddle or in between the strike prices
of the strangle. Short straddles and strangles have unlimited
risk and limited profit potential.
Selling straddles and strangles can be attractive, but always
dangerous. Just as a long straddle can lose money at an
alarming rate when the stock price doesn’t move at all,
a short straddle makes all the money in that scenario. But the
profits collected quickly disappear if the stock price moves
too much.
Potential losses on short straddles and strangles are unlimited!
Being short straddles and strangles is too dangerous for all
but the most experienced and well-capitalized trader who can
employ defensive tactics quickly if things go wrong.
Long butterflies and condors are two other ways to get some of
the advantages of short straddles and strangles without the
unlimited risk.
Here's another good site, ShaeffersResearch.com which covers
more complex butterfly and condor option trades...
schaeffersresearch.com
And if you're not comfortable with straddles and strangles,
you can still use simple puts, and calls.
I buy physical gold with "trading profits only" (trade paper
to accumulate more metal) which I take physical possession of
-no bullion banks, no Brinks bonded warehouse, my hands only.
I primarily use GLD to hedge either my paper holdings, or my
physical gold holdings.
You can use simple put/call options on GLD, or you can use the
2 X leveraged short ETF "DZZ" to hedge your physical gold, or
your gold stock holdings.
And here's another alternative idea to adding to positions
on weakness here, without getting whipsawed by volatility.
"Anticipating vs. Reacting"
Given the possibility of an IMF gold dump, instead of buying
more physical gold, or the GLD ETF on any pullback to support,
I would wait... to get more clarity on the status of the IMF
Gold sale... and I would "sell puts" on GLD.
I'd look to deep out of the money LEAP PUTS that will deliver
a rich premium, and plenty of time for the global reflation
to gain traction.
I'd also do the same with gold stocks here. I would be patient,
as we bounce around a bit here. There's been very strong buying
support at HUI 248-265. I'm not doing much trading at all here,
shaved some MFN off the TSX/S&P addition, but not much else.
I would look to sell deep out of the money puts into weakness
if we near that HUI 248-265 area again here, and maybe even
throw a few calls onto the fire.
I'll post a few specific ideas in the next day, or so, along
with some trading charts on the HUI Gold Bugs Index.
I hope that helps.
And don't forget...
SOTB |
