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Posts tagged ‘GLD’

Bernanke Speaks on Capitol Hill and Precious Metals Plummet!! Gold Tanking…Options?! By: Tim Bolger

English: A frame from a screencast from the US...

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Federal Reserve Chairman Ben Bernanke is speaking on Capitol Hill at the moment…During his speech the markets have all turned into the red and Gold is plummeting over $65 an ounce(11:50 am Eastern standard time)…Wow!! It is amazing how the Fed chief can move markets and metals prices in just a few seconds while addressing Congressional leaders and the American people.  I’m a long term bull on Silver and very bullish on Goldilox…Gold was trading down as much as $80 an ounce intraday.

So what is the options play on Gold tanking today?!

Trade#1: I would consider selling the $165 April 20, 2012 Put Options on the GLD for $4.25 a contract. Remember that in order to sell these 3 contracts, we need to have $49,500 in cash reserves in our brokerage account in case we get exercised on the GLD shares at $165 a share.  I am comfortable going long the GLD at $165 and therefore I like this trade alot…By selling 3 Put Option contracts, I will collect a premium of $1,275 minus trading fees. If the GLD bounces after this major sell off today and moves higher I will not get exercised on these shares at expiration. Either way, I like this trade and selling the Put Options will help finance the worst case scenario, in which I get exercised on 3 Put Option contracts (3 x 100= 300 Gld shares at $165 a share). Attached is the April 20, 2012 Options Chains on GLD courtesy of Yahoo Financehttp://finance.yahoo.com/q/op?s=GLD&m=2012-04.

Trade#2: I would consider taking advantage of this huge sell off in Gold today and think about buying the $165 June 15, 2012 expiration GLD Call Options for $4.80 a contract. I can buy 10 Call Option contracts for $4,800 plus trading fees and that will give me long exposure to 1,000 shares of GLD at $165 a share. My $4,800 investment will be worth over $10,000 if GLD trades to $175 by the June 15, 2012 expiration.  Attached is the June 15, 2012 Options Chains on GLD courtesy of Yahoo Finance:  http://finance.yahoo.com/q/op?s=GLD&m=2012-06. Good luck to all of the Goldilox bulls and stay tuned to Optionshoney.com for more Options action!! Show me the honey!!

For more conservative investors, I would stay away from the Options on GLD and just buy the GLD at $165 or less. The GLD is a great hedge on higher inflation and a weak U.S. Dollar…The other way to get Gold exposure is by purchasing 10 ounce gold bars or the beautiful 1 ounce Gold American Eagle coins. It is really nice to own the physical and fun to hold these shiny yellow bars/coins…and yes they are worth alot of money too!! I am also a big fan of owning shares of Canadian gold miner: Barrick Gold Corporation (ABX) at $45 or less a share.

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Can You Say Goldilox is Soaring?? Flight to Safety? This Shiny Metal is Hott in January!! Gold Options Honey? By: Tim Bolger

Who does not love Gold?? Well, maybe not everyone because it does not pay a dividend to investors.  But, I love this shiny metal!! Like Gold or not, it has been a big winner for many investors over the past few years and has provided alot of alpha to investment portfolios that would have otherwise suffered severely from high exposure to financial stocks, the sovereign debt crisis, volatile global stock markets and high unemployment around the globe.

We all know that thus far, the Federal Reserve’s monetary policy has involved printing way too many U.S. dollars to fight this recession, has kept the Federal Funds Rate at historic lows, and the result has been a very weak U.S. dollar… I translate the current economic scenario as one that makes me want to buy lots of Goldlilox!! I love gold coins and love owning the Gld.  Getting long exposure to Gold is easiest to get with the Gld (SPDR Gold Trust).  Gold hit a high of over $1,900 per ounce in 2011 and then got hammered along with several other precious metals in the month of Dec 2011. Gold fell close to $1,500 an ounce…that was painful for many Gold bulls in the money of Dec and led them to flee to the sidelines, many of which were forced to sell because of big margin calls on this commodity. Margin gives you great leverage at times, but it is very risky for volatile commodities in the short and long run…Margin calls can wipe you out of cash and trading on Margin is not recommended for many retail or institutional investors.

The sharp sell off in Gold in the month of Dec 2011 spooked alot of Gold bugs out of this shiny precious metal. Was the massive gold sell off just a huge head fake or is the bull run in Gold over?!…I think it was more of a short term correction in the shiny yellow metal…the sell off I believe was further exacerbated by lots of profit taking, margin calls and a short term phenomena. I am a firm believer in owing Gold for the long term and as a means to protect wealth…I believe Gold is a great safe haven from all of the macro-economic uncertainty prevailing around the globe!! Gold protects us against a weak global equity market and a weak U.S. dollar(which means high inflation).  Gold is a great hedge against major global economic issues(eg sovereign debt crisis in Europe), but I also believe that Gold can still run to $2,100 an ounce even if the global equity markets continue to move higher…Over the past 3 weeks we have seen Gold spike higher and I think the Gold train continues to run higher baby!!

Options trade#1: Yahoofinance Gld Jun 15, 2012 Options chain: http://finance.yahoo.com/q/op?s=GLD&m=2012-06.  I would consider buying the Gld 165 Jun 15, 2012 Call Options for $6.00 a contract. 5 contracts will cost me $3,000 plus trading fees and get me long exposure to Gold(500 shares of the Gld SPDR Gold Trust at $165 a share). If Gld trades to 175 before this options’ expiration date, this trade will be worth $5,000+. Take a look at the yahoofinance chart below on the Gld. Gld has moved significantly higher after being crushed in the month of December and I believe the longer term trend is to the upside. Good luck longs and remember that this is just a hypothetical scenario for everyone. Consult your financial advisor before making any trades…see the Optionshoney disclaimer. Options trading is not for all investors and is very risky!! Do not play if you cannot afford to lose all of your money invested in the contracts you may decide to purchase. Optionshoney  disclaimer.

The more conservative play is just buying these lovely American Eagle Gold Coins exhibited below and hold them forever!! Several other Gold Coins and Gold Bars are available for purchase from vendors such as Monex.com. Photo is courtesy of http://www.monex.com:

American Gold Eagle Coins - Buy Gold American Eagles

Chart forSPDR Gold Shares (GLD)

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