Buy Alert: October 23, 2015
Buy Alert: October 23, 2015
Option Strategy:
Buy SPDR Gold Trust $GLD November 20, 2015 $111.00 puts for $1.70 or better.
Commodity Outlook: Gold
As I mentioned in our Wednesday update, gold is in a very interesting technical position. The metal is trading just below the 200-day moving average after a sharp run up from $1,100 an ounce earlier this month.
Traders are wondering if gold has more upside, or if the asset is destined to crumble back towards multi-year lows.
Either way, the technical patterns in gold and gold miners suggest a big move is coming for precious metals.
How can we capitalize on this situation?
As you know, we already have an open call position in $NEM that’s reaping us nice gains. The gold miner is pressing multi-week highs at the $19.50 area as I write. If gold breaks higher in coming days, it’s very likely $NEM is going to accelerate to our second profit target at $21.00.
Here’s the problem…
We don’t yet have a position on to capitalize on a potential gold downturn.
Since the yellow metal is trading at multi-month highs, any sell-off could be rather intense as investors rush to lock in the past month’s gains.
Here’s a low risk way to realize that goal…
Resource Trade: SPDR Gold Trust $GLD
As you know, $GLD is hands down the best way to profit from gold market moves without having to open a futures account. The highly liquid ETF trades in lockstep with the yellow metal.
With $GLD trading near multi-month highs, there’s considerable room for bearish profit on a gold downturn.
So here’s what we’ll do…
Buy the $GLD November 20, 2015 $111.00 puts for $1.70 or better.
The current bid/ask spread for this contract is $1.60/$1.62.
Do not pay more than $1.70!
Our official entry price for performance tracking is $1.62. Your price may be higher or lower.
Exit Strategy:
Remember, we want $GLD to trade lower. Our first profit target is $109.00 while our second target is at $108.00.
Our risk control line is very tight at $112.50. If $GLD trades above that level, conservative investors should consider closing this trade to preserve capital.
What’s more, a bullish break of $112.50 will be a trigger for additional longs in the gold mining space. So expect a flurry of new call activity should $GLD rally through that important level!
Category: Commodity Trading
