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September 26, 2013

$GLD Weekly Trade Idea

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  • Strategy: Bull Put Spread
  • Underlying: GLD
  • Trade: SELL -1 VERTICAL GLD 100 (Weeklys) OCT1 13 124/121 PUT @.21 LMT
  • Trade Price: .20¢ credit per spread
  • Margin: $2.80 per spread
  • Return on Risk: 7.14%
  • DTE: 9
Risk Profile:

Trade:

Gold has been in a steady downtrend since peaking out back in Oct'12. Last week the Fed decided to kick the TAPPER down the road and gold caught a bid running from 125 to 132, it has faded since and last two days it seems like buyers are stepping up. GLD is back above it's 8 day MA and below 21 day MA. We're going to use that 125 area as our pivot for this trade. The risk here is that Gold futures trade almost 24 hours around the clock and any news out of China or Europe can drive price one way or the other which will cause GLD to gap from previous close. A trader may consider reducing size to avoid risk, but as long as GLD stays above 123.80 ( GLD is 4.11% from break even) this trade should yield 7.14% ROR.