When the Fed did their surprise 50 basis point cut three months back, I thought it very bullish for gold. GLD is higher since then. However, GDX is just barely higher. I remember that one trade I considered was buying the Dec 45 calls on GDX. GDX traded well over 50 so a person taking the trade could have more than doubled their money with a well timed exit. The more sobering news is that someone still holding is now underwater and may take a 100% loss on expiration day.
This chart shows GDX lagging behind GLD.
My lone position is long MRK hedged. Strike price on my short puts is 50. It would take a memorable week for these options to be exercised against me.
1 comment:
Yes, your analysis is correct; the implication is that one should be long GLD and short GDX which is something I recommend in my article The Long Gold And Short Stock Strategy For 2008http://my.opera.com/richardinbellingham/blog/show.dml/1607977
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