what I've been hearing is they'll make it a double tops.
Yes, that's typically the next effort after a H&S pattern has failed to hold. When the double top fails to hold, the shorts retreat to the next level they can reasonably defend. I'd expect a push down by shorts early this week after a close today near $1900. Look for $1740 as a downside target again if the $1810-1840 range is breached. If selling, be
extremely attentive.
out of curiosity; how well do you think you understand Bitcoin and its implications?
I would hope that my ruminations on Bitcoin offer a better gauge of that than self-assessment. For brevity's sake, let's just say that I see forms of direct democracy and an emergent collective consciousness a la
Gaia theory as strong potentials for crypto-currency systems beyond their intended purposes. I'd imagine that would be the difference between animal awareness and sentience, only on a planetary scale.
That could be considered a singularity. From my view, the last singularity event was the emergence of human sentience and before that,
eukaryotes.
I see, I thought you were advising to buy those puts now. By the same token then, are you buying out-of-the-money calls right now? December GLD calls with a $240 strike are selling for roughly $1 a contract. Just trying to gauge how confident you are in this move, buy doing both you would make money going both directions (assuming your call is correct of course). I chose December options since you mention end of the year in an earlier post.
Apologies, I should've been more specific. At the moment, no - I don't chase the price; calls are too expensive now relative to when the price of gold dipped near $1700 on the 25th of last month. That was when I had closed my short-term puts and opened additional Jan 2012 calls. Most of the options are in GLD, GDX/GDXJ, SLV and SLW. I use very small short positions compared to my calls for profiting from minor corrections. It also helps to offset negative Theta.
This rise and the next decline might be the last time I make use of GLD/SLV on the way up because of concerns about physical movement of metal in the trusts behind the scenes. That depends on how much metal is drawn down during the next decline relative to how much is added from now until then. I'd rather be on the short side of those ETFs when the paper and physical prices diverge than caught with calls on a rapidly-declining paper "asset", not to mention the possibility of a bank holiday with markets closed.
Your December calls should be good. I expect the real plunge to take place by the middle of 4th quarter (prior to November options expiration), wiping out most new entrants from $1900-2000 on up. At the breach of $2000, I'll be closing enough of my calls to cover all expenses including commissions and will
not be buying any additional calls. Above $2100 is when I'll start buying puts as close to $0.10 or under as possible. Over $2400 is when I'll start buying GLD puts in quantity between $160-200, again around $0.10 or under.
During that rise, I'll be scaling out of my long call positions as well, using about half of the profits to fund the put buying. Focus must be maintained on the fact that this is trading, not investing for the long-term. If that were the case, I'd be suggesting a simple buy-and-hold strategy with physical metal and quality dividend-paying miners such as AG, FCX, GFI and GG or the Tocqueville gold fund (TGLDX). Royalty companies would include RGLD, SLW and TRX. The best junior miner list is Gene Arensberg's at the
Got Gold Report.
Remember to let the deals come to you. Options for $1 might seem good now, but focus on
quantity of contracts within a defined range (GLD $160-200) rather than perceived value. High volatility will be what brings in the bacon. I'd prefer 1,000 puts bought at $0.10 than 100 for $1.00. Even a conservative estimate of the numbers from on high to a low should put the options in excess of $10 valuation. That would be the difference between $90,000 return and $990,000. You can see the tremendous impact should the options rise in value to $20, $30 or even more than $50.
This type of
gold trading analysis should be available on
Noble Nomads periodically. Another service I've found to be very effective, though less aggressive, is
SK Options.
The math, for anyone not familiar with options:
Equity option contracts allow for leverage without requiring margin trading. They are typically priced per share and a transaction normally involves 100 shares, so a $1 option is: ($1/option) * (100 shares) = $100 per contract.
$1 * (100 shares) = $100 contract
(100 contracts) * ($100/contract) = $10,000 invested
$0.10 * (100 shares) = $10 contract
(1,000 contracts) * ($10/contract) = $10,000 invested
Commissions will obviously be significantly greater, but should remain manageable. For instance, at $2 commission per contract 1,000 contracts would cost $2,000. That would bring the latter example's total to $12,000. In that case, to keep the total cost at about $10,000, a position with 833 contracts could be opened resulting in:
(833 contracts) * ($10/contract) = $8,330 invested + $1,666 commission = $9,996 total
Assuming a reasonable increase in option valuation to $10 (from $0.10 or $1 as above), considering a hypothetical decline in GLD from $240 to $170:
$10 * (100 shares) = $1,000 contract
(100 contracts) * ($1,000/contract) = $100,000 return
Having bought 100 contracts for $10,000, profit before commissions would be $90,000.
$10 * (100 shares) = $1,000 contract
(1,000 contracts) * ($1,000/contract) = $1,000,000 return
Having bought 1,000 contracts for $10,000, profit before commissions would be $990,000.
Market liquidity is another factor in being able to obtain an asking price of $10 or more, but interest is increasing along with capital flow. That should provide sufficient influx to sell when emotions run hot and everyone is calling gold a bubble again.
As always, learn about options and preferably paper trade
before investing actual money.
interesting. $DXY and UST futures up as well. $DXY over 75. Might as well have ALL the safe havens rally together, eh?
Today is a US holiday. Treasuries are up on virtually non-existant volume while the dollar is at about 1/3
rd of its normal. Both have been seeing declining volume during their rallies; not suggestive of continuation. There will have to be some devastating developments in Europe or elsewhere for the dollar to
close over 76. Until then, it's an uphill battle.
The higher the dollar and treasuries close today, the better the chances of a boost tomorrow if gold is brought down to any significant degree. Not that such an effort would realistically provide any more than temporary support.
