Thursday, June 21, 2012

Cover GLD short strangles

Close GLD short strangles GLD@152.5
Buy back short GLD Jul 143 puts and GLD 166 calls for a modest profit, netting about 30% basis the initial premiums for the sold options. As usual, return on capital on sold options is much, much lower because of margin requirements.

Gold hit hard today. I don't have a good feel for this market so am getting out. Support at GLD 148 may hold, but if it doesn't my profit may be all gone by then. A short strangle is a bet on a trading range, with the expansion in volatility, it becomes a higher risk bet.

Goldman Sachs says to short the stock market. Is this another contrary signal? Maybe, but sometimes they do get it right. Besides this call is only for a 5% down move, so it is already 1/3 of the way there. I have been looking for three hard down days in the stock market, so if I get two more, I'll add some longs.

My IWM and SPY positions are near neutral at the moment. The delta changes with decay and as prices move.
Net neutral IWM, SPY

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