Let's say somebody (me) thought gold was ready to crash big time in the next six - ten weeks. What would be the best way to short gold? Assume that I've never traded futures. Buy puts on the gold producers? Buy double or triple leverage short etfs? Futures? Buy puts on gld?
best way to short gold
- Thread starter billyjoerob
- Start date
No right answer here.
You want to make a big directional bet on any underlying? Buy/sell the futures. You want a less directional bet? In the options, a short position is synthetically equivalent to short 1 ATM call, long 1 ATM put, so if you wanted to get less directional you could sell a call.
One option could be to sell a 70-80% OTM call in GLD and then use those proceeds to purchase a GLD put spread so that net you are getting a credit or paying a small debit. I like those types of trades because if you are net bearish on an underlying, you can make a directional bet that has low cost basis in the case where you are wrong (GLD goes up) and you get paid in the case where GLD goes down.
You want to make a big directional bet on any underlying? Buy/sell the futures. You want a less directional bet? In the options, a short position is synthetically equivalent to short 1 ATM call, long 1 ATM put, so if you wanted to get less directional you could sell a call.
One option could be to sell a 70-80% OTM call in GLD and then use those proceeds to purchase a GLD put spread so that net you are getting a credit or paying a small debit. I like those types of trades because if you are net bearish on an underlying, you can make a directional bet that has low cost basis in the case where you are wrong (GLD goes up) and you get paid in the case where GLD goes down.
thanks. the volatility on gold is really low . . . if it does collapse, it should pay off nicely.
if by sell vol you mean sell calls, don't want to do that. might pop before it drops to frustrate maximum number of traders.
Good point - I don't trade gold. Is gold's premium priced to the upside? Are the miners as volatile to the upside?
You would expect gold options to have a positive vol skew, but the skew is not consistently skewed one way or another. It just depends on sentiment at any point in time.
The relative volatility (realized) of the miners vs gold depends on which trading instrument you are using for gold. If you're using the ETF, then the miners are usually more volatile (at least recently). Of course, if you're trading gold futures which are highly leveraged, then they will be more volatile than the miners equities.
The relative volatility (realized) of the miners vs gold depends on which trading instrument you are using for gold. If you're using the ETF, then the miners are usually more volatile (at least recently). Of course, if you're trading gold futures which are highly leveraged, then they will be more volatile than the miners equities.
If you think gold will crash medium term, you may wait until next week in case Greece does blow up. It sounds like the odds of a bank run n Greece is fairly high.
If that happens there would likely be at least a temporary pop in gold.
You might get a much better price in a week or two. At least save some room to average, in case it does pop up.
If that happens there would likely be at least a temporary pop in gold.
You might get a much better price in a week or two. At least save some room to average, in case it does pop up.