TheOptionPlayer.com sets up a Gold Trust Shares ETF (NYSE: GLD) short-term (43-day) option trade (based on Thursday’s closing quoted bid/ask prices).
Investors could simultaneously:
The difference between funds received and paid out is an approx. 18% profit if the GLD ETF closes above $122 on Friday June 18th, but immediately execute a trade adjustment if it appears the price is moving lower. If the price gaps lower before trade entry we might revise the strike prices. See Guidelines page at www.theoptionplayer.com/ for explanation on how trade is set up.
Why we recommend it:
• As evidenced in the Gold Trust Shares ETF (NYSE: GLD) chart below, gold prices plummeted over the past few weeks.
• A report in the Market Realist financial newsletter suggests the drop in precious metals was most likely due to the stronger US dollar.
• An analysis in Yahoo Finance stated both a weakening dollar and flatter yields in the short term should be good for gold.
• This week’s Federal Reserve meeting had the expected outcome, and the FOMC members refrained from raising the interest rates. Higher rates make gold less appealing to investors because they can get higher interest payment from bonds.
• A Forbes article mentioned how even with recent weakness, gold used in technology industries saw growth for the sixth straight quarter. Gold’s usefulness in memory chips and wireless applications continued to sustain a healthy demand.
• As seen in the chart below, the GLD ETF found support at the 200-day MA and bounced back up as downward momentum starts to dissipate.
• The GLD ETF typically bounces higher from the current extreme oversold level.
• The Gold Trust Shares ETF has not closed below its 200-day MA since last December and it is highly probable for the price to be above our sold put on the June option expiration date.
52-Week High: $129.51
52-Week Low: $114.80