• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar

Investing With Options

Become a Better Options Trader

  • About
  • IWO Trading Floor
  • IWO Courses
  • Blog

A Longer Term Trade for you "Investors"

June 17, 2009 By Steven Place

{+++}
AUY is a gold name I've been watching. Had a great breakout from its multimonth channel, and then came back and failed the breakout. Currently the 50 day moving average is looking to hold price.

AUY Daily Chart
AUY Daily Chart

Here's the trade:

Sell AUY Jul 9 Puts for .60 or better

Price is currently pretty close to 9, and I don't mind getting assigned at this level.

So selling 9 at .60 puts your basis at 8.40, and with a max return of .60 that puts your return on basis at about 7% in about a month. If I am assigned, I'll be incorporating a covered call strategy to further reduce my basis.

You do have gamma risk here, which means if the position goes against you, the delta further increases and you can get "more wrong" the further down it goes. I'm willing to accept that risk with the premium that is on the market right now.

In terms of risk management, absolute worst case would be below the bottom of the channel and a break of the 200 DMA at 7.30.

This is a longer term play so it does require a bit of patience just to deal with it.

Free Iron Condor Toolkit

Want to learn how to beat the market without needing to time the market?

Do you desire a way to earn aggressive returns without staring at screens for six hours a day?

Get this free iron condor toolkit that will show you how this trade works in the real world.

Download the Toolkit Here

Primary Sidebar

Resources


Option Trading Basics
Income Trading

Recent Posts

  • 3 Option Trades for CCIV
  • Time to Call a Top in Solar
  • Winning In Both Directions
  • Big Water, Small Hose
  • Does Zoom Pass The Smell Test?

Get The Options Trading Training You Need.

See All IWO Trading Courses!

© 2017 InvestingWithOptions | Disclaimer | Financial Disclaimer | Terms and Conditions | Privacy Policy