Follow Up to Trade Alert – (GLD) May 16, 2013

As a potentially profitable opportunity presents itself, John will send you an alert with specific trade information as to what should be bought, when to buy it, and at what price.

Further Explanation to: Trade Alert - (GLD)

Buy the SPDR Gold Trust Shares (GLD) June, 2013 $120-$125 call spread at $4.45 or best

Opening Trade


expiration date: 6-21-2013

Portfolio weighting: 10%

Number of Contracts = 23 contracts.

I want to take advantage of the $100 swoon on the price of gold since we put on our SPDR Gold Trust Shares June, 2013 $150-$155 in-the-money bear put spread.

George Soros has just finished dumping his massive position in the yellow metal, which clearly accounted for a big part of the drop. In the meantime, long term value players, like Omega’s Leon Cooperman, have started scaling in on the long side. So the market may reach some sort of rough balance in the near future.

Gold’s trouble’s are anything but over in this yield hungry world. I am now hearing of some extreme forecasts of a downside target of $500, which involve the entire unwinding of the six-year bull move. But with the margin calls now out of the way, the dramatic $100 intra day moves are gone for the time being.

The SPDR Gold Trust Shares (GLD) June, 2013 $120-$125 deep-in-the-money bull call spread gives me a cushion of $92 on the downside and still make the maximum profit. I also still have a bigger $180 cushion on my existing (GLD) June, 2013 $150-$155 put spread. I only need the market to settle down for four weeks to coin it on both positions. The elevated implied volatilities on (GLD) puts make these deep-out-of-the money positions profitable. This is a rare event.

The best execution can be had by placing your bid for the entire spread in the middle market and waiting for the market to come to you. The difference between the bid and the offer on these deep in-the-money spread trades can be enormous. Don’t execute the legs individually or you will end up losing much of your profit.
Keep in mind that these are ballpark prices only. Spread pricing can be very volatile on expiration months further out.

Here are the specific trades you need to execute this position:

Buy 23 June, 2013 (GLD) $120 calls at……………$15.00
Sell Short 23 June, 2013 (GLD) $125 calls at.…….$10.55
Net Cost:………………………………....……..…....$4.45

Potential Profit at expiration: $5.00 - $4.45 = $0.55

($0.55 X 100 X 23) = $1,265 – 1.27% for the notional $100,000 model portfolio.

GLD 5-16-13

Gold Nuggets You Can Only Fall So Far So Fast