I added the 119-115 GLD Put spread in a 1:2 ratio for July expiration. The spread cost was $21 per contract and has a break-even at 118.79 GLD and a maximum profit potential of $400 per contract or about 20 fold.
I think there is a good chance of breakdown of Gold here, unlike what the perma bulls think. We are in the seasonally weak period with an overextended COT position and very bullish sentiment. I do not think the dollar price of Gold can withstand further USD strength.
Since this is a 1:2 spread my profit is maximum at 115 and I start giving it away the further it goes with losses beginning at 111.
I doubt we will go that low by July 16th but I am prepared to go long some at that point. I also have a lot of positions which would benefit from a total market collapse ( I see that as the only situation where Gold retreats that much that quickly) so the position is not as risky as it appears.
4 comments:
Congratulations on the great trades(corn and short gold). I am wanting to get some exposure to natural gas. Do you still like Peyto energy? Are there any other plays you like better? I almost got in on the corn i m still kicking myself for missing that move!
Thanks.
I like Enerplus and Chesapeake.
Peyto is relatively expensive but maybe the premium is deserved as they have weathered the cycle quite well.I sold Peyto some time back.
CHK is interesting as they have a lot of reserve potential and they are really good at hedging.
I recently bought Paramount Energy trust convertible debentures yielding 7% till 2015.
I see these as relatively safe play on NG.
These are convertible into stock at a conversion price of about 40% above where the stock is trading.
If Natural Gas doubles, very likely Paramount will at least triple. That means your conversion will net you a 100% gain!
If Natural gas does not go higher than you get a nice 7% yield. It is hard to buy calls 5 year out on the curve on natural gas. Convertibles may be the enxt best thing.
BTW covered some short positions into the close today. Still slightly net short. May sell puts against short positions and CHK (which I would like to go long)on further weakness.
Think i'm gonna pickup the peyto. I've went over and over the numbers and they look like a solid company. Maybe it will pull back a little. If you don't mind me asking what price did you get out of peyto?
$13.40.
Look at the others as well.
U may be able to pick all of these cheaper so do not buy all at once.
The risk of a stock market crash is quite high IMO.
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