Gold Trading: Should You Be Buying Gold?

Gold Trading: Is Gold a bubble or the trade of a lifetime?

Maybe both.

I have not been in the gold trade myself. But several of my members are, and doing very well so far.

Here is a chart provide by one such member. It shows that the stock of gold companies, miners, etc continue to appreciate evn though gold prices peaked earlier. If this hold true this time, even if gold has peaked, which it does not look like it has, the miners will continue to rally.

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Last week a member emailed saying that it looked like GLD had topped out and would I consider selling calls. My answer: No Way.

This train still has momentum on its side as you can tell from the rally today. What I did do on Friday, was to buy a debit spread in GLD.

I bought the Jan 115 Calls and Sold the Jan 118 Calls. I paid about $100 per spread and am already up 17% today. Not bad, but I expect it to go higher and with Jan expiration I can wait for a couple more weeks to see what happens.

 

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Where do you think Gold is headed? Let us know in the comments section below. And please check out our blog and training section for more relevant options trading content.

14 Comments

  1. EH on November 23, 2009 at 1:11 pm

    As long as the irresponsible Tax & Spend Democrats are in power, the dollar will continue to decline (and be destroyed by the eventual inflation), therefore GOLD continue to soar! The same goes for all other FIAT CURRENCIES of the world. Yes, I’ve been doing Bull Call Spreads on GLD for a while now and very profitable. Keep up the good work and Happy Thanksgiving

  2. EH on November 23, 2009 at 1:13 pm

    Forgot to mention the Democrats also are “redistribute wealth to the poor, lazy, unions, and illegals” Buy your gold and store it OUTSIDE THE US!

  3. Peter on November 23, 2009 at 2:14 pm

    I guess the Tax and Spend Democrats should have not spent a dime and let the economy sink into the abyss after the Spend and NOT Tax Republicans wasted our hard earned dollars fighting wars against terrorist in Iraq that never existed and never fought the war against the Bin ladens and Taliban that is still a problem for us due to the fact the GOP’s misplaced their priorities.

  4. danno on November 23, 2009 at 9:13 pm

    peter your either a kid or not a student of history. You are a statist. As long as the politicians tax and spend the money as YOU and they see fit you are all for it. Then according to you the tax and spend democrats have misplaced priorities as well as they have not removed 1 troop and here they said they would. They have not created 1 job. Spent trillions. Debt will be off the chart. Obamadebt will dwarf bush debt. Gold higher. Earners taxed more to give to the earn nots.

  5. Frank on November 24, 2009 at 12:21 pm

    what I learned from many option class is: when we long options, we need to buy in the money (ITM) or at least at the money(ATM)
    when we short option we sell OTM.

    why you bought OTM (on fri, GLD was around 113), why didn’t you long 113 and short 115 or 116?

    another question is can we also sell vertical creadit spread (STO, 110P, BTO 105P)?
    can anybody compair debit spread and credit spread for this case?

  6. Genius on November 24, 2009 at 1:07 pm

    I went out of the money at 115 because I think gold is going higher and the 115 was cheaper so in case i am wrong I lose less, but if i am right, i make more.

    And you can sell the 110/105 puts as well. With the credit spread your gain is limited but you have a much higher chance of making money. In this case i feel that gold is going much higher and so I took a gamble.

    Buying options is always a gamble, unless you have some inside information. Selling options puts the odds in your favor.

  7. EH on November 24, 2009 at 3:43 pm

    Right, normally you buy ITM due to concerns about delta and theta which you no doubt learned in that class. (Ron Ianeri of OU is the best) In this case, gold is obviously going higher so I buy otm PLUS I sell a call about 2-3 strikes higher to reduce the cost even further. As gold advances, add more debit spreads (like Laddering Bonds or CDs) Genius is right about selling options, you get the credit right away and keep it as long as the short stays OTM, while buying options, you got to be right about MANY things, hence it is somewhat a gamble. HAPPY THANKSGIVING TO ALL!

  8. srikant on November 25, 2009 at 12:21 pm

    Al
    just curious why you didnt publish this trade as a trade for November?

  9. Genius on November 25, 2009 at 1:46 pm

    Srikant,

    Optiongenius trades are option selling trades with a high probability of success. This trade is more of a gamble and not the same flavor as the site so I left it out and only posted it here. This trade might blow up and lose 100% if GLD goes down or stops going up.

    The free trade ideas I post on the blog are to learn from and papertrade so you can see other trade strategies in action.

  10. Frank on December 1, 2009 at 3:05 pm

    GLD made another record high today, when is good time to get out of this trade? should we lock our profit now or pray for a home run?.
    what is guideline to place an contigence order to lock the profit of this kind of debt spread?

    thanks.

    • Genius on December 2, 2009 at 7:47 pm

      It’s fine to get out now. GLD is above our long strike and so if it keeps going higher we will not benefit.

  11. EH on December 1, 2009 at 3:33 pm

    To lock in profit, you would close the debit spread when its very close to parity (Dont go thru exercise-assignment as the fees are costly, even at Thinkorswim)
    If you have a long call (naked), then roll it UP. (be aware that Delta shrinks, then wont make as much BUT wont lose as much either! Rolling up tightly really paid off during the Halloween correction.

  12. Xueren Zhang on December 10, 2009 at 5:42 pm

    OG,just a follow up for your GLD trade ( bull call spread of Jan 115-118).You have closed it or hanging on ? Dollar carry trade,and correction has come.

  13. EH on December 10, 2009 at 6:19 pm

    Option Genius is a genius again. GLD crashed $5 two days later after his “get out” comment. All the spreads went OTM, I wish the correction waited until after December expiration! GDX held up better though.

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