Buy Alert: October 30, 2014

Buy Alert: October 30, 2014

 

Option Strategy:

Buy Goldcorp (GG) January 16, 2015 $18.00 puts for $0.90 or better.

 

Commodity Outlook: Gold

Gold is in trouble again…

According to yesterday’s FOMC meeting, the third round of quantitative easing (QE3) is officially coming to an end. The news has the US Dollar jumping to test recent 52-week highs.

But more importantly, gold is dropping to test important technical support at $1,200. While we may get a bounce off this level, it will likely be short lived.

There’s a very good chance the yellow metal breaks to new multi-year lows under $1,180 by year-end.

As a result, now’s the perfect time to establish another put position in the gold mining industry.

 

Resource Company: Goldcorp (GG)

Goldcorp is a Canadian gold miner with assets in North, Central, and South America. The company reported quarterly earnings this morning that were absolutely abysmal.

Not only did they report a loss of $44 million, or $0.05 a share, but they also took a $36 million writedown on one of their Mexican mines.

Folks, the times are very tough for GG. And if the price of gold continues downward, GG investors will likely run for the hills in coming months.

So here’s what we’ll do…

Buy the GG January 16, 2015 $18.00 puts for $0.90 or better.

The current bid/ask spread for this contract is $0.74/$0.79.

Do not pay more than $0.90 per contract!

Our official entry price for performance tracking is $0.79. Your price may be higher or lower.

Exit Strategy:

Remember, we want GG to trade lower. Our first profit target is $15.50. Thanks to their horrible earnings, GG could achieve this target even if gold holds the $1,200 an ounce area.

But if gold falls drastically below $1,180, GG could crash to our second profit target at $14.

The risk control price for this trade is $23.00. If GG trades above that level, conservative investors should consider closing this trade to preserve capital.

 

Category: Commodity Trading