GLD Options

I've been trading the monthlies since they were around 80 with bull put spreads and had great success. What I did was to buy the Jan 2010 80 and sell the Jan 85 early in the 2009 for a credit and let time pass. As GLD rose, when it reached 85, I sold a butterfly, selling the Jan 80, buying two 85's and selling a 90 for a nice credit. When we reached 2010, I began again with a 105/110 spread. I've been doing that kind of trade all the way up to where we are now. It's worked like a dream.
 
The gold has been in a bull market so, of course, it worked like a dream.

As they say, don't mistake bull market for brains.
 
MTE - You are, of course, correct in your observation that the technique I used worked largely because GLD has risen in the last two years. However, I didn't claim that utilising it was the result of a massive brainstorm on my part, either. So, it's a bit snide for you to question my intelligence. It may also interest you to learn that the strategy worked better with GLD than with SPY over the same time frame, even though both had good gains, due mainly to the larger time value in GLD put premiums. Further, I back tested the technique to when GLD was first created in late 2004. Options weren't available early on, but GLD itself did not go straight up, it had a down year in 2008. Thanks to the use of strikes far out in time, paper losses in the weak interim year were minimal and no additional capital was required before a profitable roll up butterfly was able to be done. All of that is history and the question now is, will it work in future? Given the apparently inexorable debasement of the Dollar, GLD seems destined to continue higher, so I see no reason to abandon what has been a very profitable strategy.
 
MTE is correct. Any bullish strategy on gold these last few years worked great.

In itself does not say if you were lucky or good. At this point it doesn't really matter, profit is profit ;)

The interesting part begins when you think gold is going to slow down, can you still generate income from that? Changing market conditions is the true test of a trader...
 
To heisasafari - You are correct, a change in the long term trend in gold would dictate an alteration of the technique. As I indicated in my reply to MTE, I don't envision that happening anytime soon, but one never knows. The great thing about the strategy is that the spread has a risk/reward ratio of 2/3 when initiated, so interim weakness does not cause angst and by the time the long term trend has actually changed, there ordinarily would have been at least several profitable roll ups netting a point or more each and a final exit could be made for some number lower than a 5 point debit (maximum loss 2). As some have said to me, when the market in GLD is dull (rarely of late), it's kind of like watching grass grow, there is so little trading in the technique. My answer was "true, but at the end you sure get a beautiful lawn". LOL
 
Quote from optionsmaven:

MTE - You are, of course, correct in your observation that the technique I used worked largely because GLD has risen in the last two years. However, I didn't claim that utilising it was the result of a massive brainstorm on my part, either. So, it's a bit snide for you to question my intelligence. It may also interest you to learn that the strategy worked better with GLD than with SPY over the same time frame, even though both had good gains, due mainly to the larger time value in GLD put premiums. Further, I back tested the technique to when GLD was first created in late 2004. Options weren't available early on, but GLD itself did not go straight up, it had a down year in 2008. Thanks to the use of strikes far out in time, paper losses in the weak interim year were minimal and no additional capital was required before a profitable roll up butterfly was able to be done. All of that is history and the question now is, will it work in future? Given the apparently inexorable debasement of the Dollar, GLD seems destined to continue higher, so I see no reason to abandon what has been a very profitable strategy.
More...

I wasn't questioning your intelligence. I was just making an observation since the purpose of your post isn't clear except for pointing out that you made some money. There are dozens of newbies (and I'm not saying you are one of them) that come to these boards claiming to have figured it all out by having booked a solid and consistent performance over the past X months, while in reality they just got lucky by trading a bullish strategy in a bull market. So once again, I'm not saying you fall into this category, but your post did sound a lot like it.
 
OK MTE, I certainly don't want to start a confrontation, so I'll accept your explanation re the brains comment at face value. In any event, I certainly wasn't claiming that the technique I have been using with GLD was a magic bullet of some kind. It's just something I thought might be of interest to Forum readers. BTW, I'm far from a "newbie". I've been trading options since perhaps before you were born. Back in the sixties, prior to when the exchange trading began at CBOE, I used to trade in the infomal OTC market with the options firm Thomas, Haab and Botts, now one with the dust. Currently, in semi retirement, my hope is that I can share that experience gratis with Forum options traders, no matter how sophisticated or naive they happen to be. Cheers
 
Quote from optionsmaven:

OK MTE, I certainly don't want to start a confrontation, so I'll accept your explanation re the brains comment at face value. In any event, I certainly wasn't claiming that the technique I have been using with GLD was a magic bullet of some kind. It's just something I thought might be of interest to Forum readers. BTW, I'm far from a "newbie". I've been trading options since perhaps before you were born. Back in the sixties, prior to when the exchange trading began at CBOE, I used to trade in the infomal OTC market with the options firm Thomas, Haab and Botts, now one with the dust. Currently, in semi retirement, my hope is that I can share that experience gratis with Forum options traders, no matter how sophisticated or naive they happen to be. Cheers
More...

As I said, your post sounded like a newbie who thinks he/she found the magic bullet. It wasn't my intention to insult or confront you so I apologize if my post came across that way.

By the way, you are right, if you were trading them in the sixties then it was before I was born. :)
 
You must log in or register to reply here.
Back
Top