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Trade of the Day: Play Gold’s Decline

The shine is wearing off of gold, but these February puts will help you play it


I’ve shared my current bullish bias, and if the market goes up, gold prices tend to decline so it’s a safe bet we’ll also see the SPDR Gold Shares ETF (NYSE:GLD) pull back. (My colleagues, John Jagerson and Wade Hansen of SlingShot Trader recently explained the reasons why gold is going down.)

My scans show the downward trend is pervasive in mining and gold stocks:

Barrick Gold (NYSE:ABX) is weak but leveling, though Goldcorp (NYSE:GG) is rated among the weakest, while America Movil S.A.B. de C.V. (NYSE:AMX) and Newmont Mining (NYSE:NEM) are reconfirmed sells in my system, as is GLD.

But GLD stands out as an option candidate because I found some cheap puts that give us two months to capture the move down.

Buy GLD Feb 159 Put options at $1.57 or lower. GLD shares are currently $165, but it’s not uncommon for them to drop several dollars in a few days’ time. After entry, take profits if GLD hits $159.90, or the put option hits $3.20. Exit if the stock price closes above $166.80, or the option price drops down to $1.00.

InvestorPlace advisor Ken Trester is editor of the popular Maximum Options program. Trester has been trading options since the first exchanges opened in 1973 with a winning streak that goes back to 1984 with money-doubling average annual profits since 1990.  Try Maximum Options today for 2 months for only $99.

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