Use Gold to Foil the Crisis Summer

by Michael Shulman | June 24, 2011 10:14 am

Another options trading strategy from InvestorPlace.

Gold-barsThis summer is shaping up to be a time of “negative catalysts” only – the federal debt ceiling crisis, the ongoing drama in Greece and with European banks in general, a softening economy with falling home prices and rising unemployment. Good stuff, eh? Yes, if you play it right.

There are almost too many ways to play a choppy summer and timing the ups, downs and insanity of politicians is impossible. So play the market itself.

Say what? You mean, play the S&P or NASDAQ indices?

No — that’s a sucker’s game.

You mean, play the banks and the home builders, the industries in the thick of this summer’s news and trading action?

No — those are long-term short positions, not something to trade at this time.

I mean play uncertainty — both in the real world and the market. Real world uncertainty means gold; market uncertainty means the CBOE Volatility Index (CBOE: VIX[1]).

First, gold. The SPDR Gold Trust (NYSE: GLD[2]) is the exchange-traded fund for gold and like the precious metal it has been stuck in neutral for quite a while.

Do you agree with me that — 1) Greece will eventually default in some fashion and — 2) politicians here will kick the can down the road on real measures to fix structural deficits and the rising debt? If you agree, the long-term play is gold, and you can play it three ways:

Please go to page 2 for more of “Gold Foils the Crisis Summer.”

Another options trading strategy from InvestorPlace.

VIX Monthly OptionsSecond, the VIX. This measure of market uncertainty, called the Fear Gauge, is the friend of the trader who wants to make money but is uncertain of market direction. So she trades uncertainty. Sounds like the “Whose on First” routine but this is a real trade. The VIX has been near its historic lows and the summer should prove to be volatile in the real world and in the markets.

You can trade the VIX four ways:

Have a good summer and be careful.

Michael Shulman uses simple trading tactics to make solid, profitable investments in falling stocks in his Short-Side Trader[4] service.

  1. VIX:
  2. GLD:
  3. VXX:
  4. Short-Side Trader:

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