Hey all,
today's trade is all about gold. As prices moved to dramatic extreme's over the late summer, prices became overbought and needed time to correct. I believe we are entering that correction phase and prices ought to work their way lower over the coming sessions.
Today, prices moved slightly higher on the open and then promptly collapsed. The consolidation and then subsequent failure at these lower levels has carved out a nice Bear Flag formation that we can use to trade. Indeed, based on the failure through 172.86 I prepared to buy a put position. I waited for the w%r to become overbought on the 3 min charts and then took a position in the October $165 puts. Because there is so much time left on this option, the premiums were a bit high. As a result, I was able to buy 4 contracts at $2.68 ($1087) with my stake (where the total capital invested is no more than 1/3 of my stake) and will risk down to $2.32 on trade. I came to this number since we never risk more than 5% of the total stake ($3500) on any one trade. 5% of $3500 is $175 - commission ($30) = $145/4=.36 on the option price.
That's all for this post,
Brian Beamish FCSI
The Canadian Rational Investor
the_rational_investor@yahoo.com
the-rational-investor.com
All appropriate disclaimers apply, DO NOT risk capital in options trading that you cannot afford to lose.
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