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Strategies & Market Trends : Strictly: Drilling II -- Ignore unavailable to you. Want to Upgrade?

To: bobkansas who wrote (11050)	4/24/2002 1:52:44 PM
From: waverider	Respond to of 36161

I would seriously consider NEM 2004 Leaps. It is the leader in the industry and an excellent way to play the bull run in PM with significant leverage and a reasonable risk control profile (being a large cap...funds will go there first...larger float...etc., etc.) wr

To: bobkansas who wrote (11050)	4/24/2002 3:04:30 PM
From: BSGrinder	Read Replies (2) \| Respond to of 36161

Like waverider, I think playing NEM options is a good strategy; better, actually, than playing XAU. The NEM options are cheaper: for similar roughly at-the-money June calls, the XAU Jun 75 is asking $4.60, while the NEM June 30 is asking $1.80. The XAU also contains the big hedgers ABX and PDG, which are not moving as well with the POG. However, I think you pay way too much premium when you go out so far (January 2004). A Jan 30 '04 call is asking $6.80. For that kind of money, why not buy a Sep 25, at $5.80, and give yourself $4.25 of intrinsic value and 5 months exposure to the rising gold price. As September approaches, you can sell that call and take a similar position for another 6 months. I use an accelerated version of that strategy, buying at-the-money calls only 2 or 3 months out. Since I am only spending about a quarter of what I would spend on LEAPs, I can afford to have a series expire worthless and still be able to buy a new set at that time. Another important advantage of shorter expirations over LEAPs is that they tend to impose more discipline on your selling and entry points. I found that when I owned LEAPs, I was never sure of the right time to sell them, figuring if things were going well, I had plenty of time to wait for them to get better! As a result, many valuable LEAPs just frittered away to worthlessness. Similarly, on the buying side, I always figured that since I was playing for the long run, the exact entry point didn't matter much, so I didn't time my purchase to take advantage of pullbacks. One final advantage of not using LEAPs is that if a shorter period goes against you, it can be a very nice entry point when you reload. These are just a few of my thoughts and experiences on playing the gold rush with options. I think it likely that for the foreseeable future, almost any strategy that invests in decent PM companies should succeed wildly. Good luck with whatever approach you select. /Kit