GE Update, trading Gold?
Today, our 500 share GE covered call position is showing a profit YTD of $782. We are enjoying a daily time decay (theta) income of $4.20. We decided to try and add to our position today by selling another put. That order is still open and has not filled. Subscribers get the details of this trade.
What about Gold? There is huge trading volume in the GLD, which tracks the actual price of gold. We also find large volume in the GDX, which is the gold miner’s ETF. Options volume is very high in both of these names. It seems that there would be great opportunities to trade these symbols and their options. We haven’t found it to be profitable – and we have tried to find a way to achieve consistent profitability in both GLD and GDX for a very long time.
It just never seems to work out using the DeepPocketOptions system. We have been trying to trade these names for 2 or 3 years and have to admit failure. Over the last 6 months, we have been putting a lot of time into this effort and have nothing to show for it. Our GLD/GDX position is slightly lower than it was 6 months ago. We are, over time, exiting our position and do not plan to return. We urge you to do the same. If you somehow DO have an options-trading system that works for GLD/GDX, let us know. We would love to see that it is at least possible.
Why can’t we seem to make any money in GLD/GDX? There are two primary reasons for this. One, gold can be very volatile. Daily moves can easily be 2 to 3% or more, based on the news of that day. The wide price swings also cause wide swings in the volatility of the options, which raises the price. It’s very difficult to keep a position under control when tomorrow’s price can often be drastically different, over and over. The second reason, we believe, is that gold does not really correlate to stocks. Maybe it does in long term cycles, but over any given monthly option cycle, absolutely not. You can’t hedge your portfolio properly because of this. Gold does have a Delta as it relates to SPY for example, but it’s too unpredictable to be reliable as a hedge. You are always exposed to the price swings in gold, no matter how you structure your position. Whether it’s the actual price, the volatility, or the correlation – they are all dangerous.
So, we’re moving on. Remember that we always strive to enter and exit positions over time so that we can use dollar cost averaging. This usually results in a better result than choosing any one point in time to make a decision. The more pieces of the puzzle that you have collected – the better your decision making process.
We are selling at the money calls or even in the money calls to exit. Always study your trades for positions that aren’t working. It’s better to get out of them and use your time to focus on your profitable positions. Spinning your wheels burns a lot of gas and rubber…….