May 10, 2019

When Fundamentals and Technicals Come Together in GLD

You’ve done your analysis.  You have done your homework.  You have come to the conclusion that you want to get short GLD using an options strategy based on an agreement of fundamental and technical analysis.  If your decision is based solely on direction (and not involving implied volatility), you may want to consider a debit put vertical spread.  But how does one know which strikes to use?
 

We have a “double top” and we came right up to resistance at the 50-day moving average.  Couple that with a stock market that is showing a possible bottom and you can make a bearish case for Gold.

Reference the chart below to see how we constructed a debit put spread in the Gold ETF (Ticker: GLD).  We purchase the GLD 5/24 weekly expiration 119.5/121.5 put spread for $0.60.  If we max this spread out, we will have a reward to risk ratio of 2.33:1.

Follow me on Twitter @MikeShorrCBOT

about the author:

Mike Shorr

Since 1994, Michael has been an on-the-floor market maker, Vice-President of Interest Rate Derivatives for Knight Financial Products and Director of Education and Options Instructor at Trading Advantage. He makes the oftentimes complex world of options and trading accessible to the novice and advanced trader alike. Michael has a Bachelor of Science degree in Statistics and Finance from the University of Illinois Champaign-Urbana. He presently is Director, Trader Education at ProsperTradingAcademy.

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