Profitable Trades on Gold Stocks: Barrick Gold (ABX)
Click to Enlarge So in addition to the GLD long and the bet on gold miners as a whole, I want to add risk into a specific gold mining company. I chose Barrick Gold Corp (USA) (NYSE:ABX) because of its decent fundamentals and technical promise. I will sell downside risk here, but also invest that into upside promise.
The Trade: Buy the ABX April $20/$21 debit call spread. This is a bullish trade for which I risk 20 cents to open. I need the ABX stock price to rise through my spread by mid-April. To mitigate out-of-pocket risk, finance the bet by selling downside risk against levels that have been defended recently.
The Bank: Sell the ABX July $15/$14 credit put spread with 85% certainty of yield 15% on risk. As long as ABX stock stays above my sold spread, any premium I recapture from selling my debit calls would be mostly profits.
Selling options can be risky, so never risk more than you can afford to lose.
Nicolas Chahine is the managing director of SellSpreads.com. As of this writing, he did not hold a position in any of the aforementioned securities. You can follow him on Twitter at @racernic and stocktwits at @racernic.