Buy Alert: December 19, 2014

| December 19, 2014

Buy Alert: December 19, 2014

 

Option Strategy:

Buy Agnico Eagle Mines (AEM) February 20, 2015 $22.50 puts for $1.30 or better.

 

Commodity Outlook: Gold

Gold is still not acting well…

Ever since the yellow metal rallied to $1,240 an ounce earlier this month, it has been met with nothing but selling. As I write, gold is trading at $1,196 and hanging on for dear life.

Take a look at this chart…

As you can see, gold is trading in an upward trending channel pattern (red lines) from the November lows. However, the long-term trend of the metal is still down.

That leads me to believe gold will break lower from the red channel pattern in coming days.

Here’s a low risk way to profit from a potential downturn in gold…

Gold

 

Resource Company: Agnico Eagle Mines (AEM)

AEM is a Canadian gold miner with operations in Mexico, Finland, and Canada. The company released Q3 earnings in early November that were downright disgusting.

The miner suffered a net loss $15.1 million (-7 cents/share) in the quarter. That’s a far cry from the $74.9 million profit (+43 cents/share) in the same period a year ago.

Clearly, low gold prices are hurting this company.

So it stands to reason if gold turns lower in coming weeks, investors will be inclined to dump AEM right along with it.

So here’s what we’ll do…

Buy the AEM February 20, 2015 $22.50 puts for $1.30 or better.

The current bid/ask spread for this contract is $1.17/$1.23.

Do not pay more than $1.30 per contract!

Our official entry price for performance tracking is $1.23. Your price may be higher or lower.

Exit Strategy:

Agnico Eagle Mines

Remember, we want AEM to trade lower. Our first profit target is $22.00, while our second target is $20.00.

The risk control price for this trade is $26.50. If AEM trades above that level, conservative investors should consider closing this trade to preserve capital.

Until next time,

Justin Bennett

***Editor’s Note*** This is the last time you’ll hear from me in 2014. Be on the lookout for another high profit potential options trade in early 2015!

 

Category: Commodity Trading