Trade of the Day: SPDR Gold Shares (GLD)

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The asset I want to focus on this week is gold ($GOLD), following Friday’s test to fresh lows for the year. The suits-and-ties continue to talk about buying gold as “protection,” but I went on record two weeks ago saying that the yellow metal could tumble below $1,000 an ounce this year.

I also profiled the 10-year monthly chart on gold that showed possible risk to the $900-$800 area, which is where I said I would possibly start initiating a position. Investors can buy gold coins from a variety of dealers, but it is important to be careful of the “spot” prices or the handling fees they charge.

As far as paper-trading the yellow metal, I also profiled a couple of put option trades to play a continued pullback in the SPDR Gold Shares (GLD).

The GLD December 100 puts (GLD151218P00100000) were going for $0.90, and they still look attractive. These options expire in less than three weeks, so, while I still like them, there is risk involved if GLD shares stay above $100. I consider options that have less than three weeks until expiration to be in the “danger zone,” so they need to be traded carefully.

I have also added the GLD January 97 puts (GLD160115P00097000) to my watch list, as they would allow a possible trade more time to play out. These options expire in mid-January of 2016, which is something that makes me a little cautious, as well.

I also profiled the GLD March 95 puts (GLD160318P00095000) at $1.20 two weeks ago. These options weren’t very active on Friday, as volume was light. However, open interest continues to grow, and it is now more than 3,400 contracts. The risk/reward ratio for this trade still looks great at current levels, as it offers more than four months of time premium to play a possible drop to the low $90s on GLD shares.

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Article printed from InvestorPlace Media, https://investorplace.com/2015/11/gold-2/.

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