Sunday, September 25, 2011

$GLD Idea: Bull Put Spread

$GLD October 154/149 Bull Put Spread @1.47 with 26 days to Expiration

This is a $GLD chart that mainly analyzes the volatility of the underlying asset.

In looking at this chart and an options strategy that puts the probabilities in my favor, a trade that jumps out to me is a Bull Put Spread.

Chart Analysis: 
With the sell off, volume was high comparing to previous sell offs.  Current Implied Volatility is at the high of its previous 90-day range.   Augens Standard Deviation Spike hit an extreme of -3.39.

Trade Analysis:
While I hate to call bottoms with any sell off, the Oct 154/149 Bull Put Spread for a 1.47 Credit is an options strategy that I favor.  This trade gets you positive Delta and Theta while getting you negative Vega.  Below I have emphasized a trade that I like that expires at October expiration.

Above is an options strategy that I favor after analyzing the chart structure, implied volatility, and options trade. Currently this trades for a 1.47 credit (or required $353.00 in margin).  If this were to expire at October expiration above 154.10 the trader would receive the 147.00 in full credit (or 41.6% return on margin).  The breakeven on this trade would be around 152.50.  When aligning the strategy with the technicals, this is a trade that I believe the odds are on your side with buyers stepping in around the highlighted level on the first picture.

**As always, I am no expert and any further comments are considered an appreciated.**

No comments:

Post a Comment