When John identifies a strategic exit point, he will send you an alert with specific trade information as to what security to sell, when to sell it, and at what price. Most often, it will be to TAKE PROFITS, but, on rare occasions, it will be to exercise a STOP LOSS at a predetermined price to adhere to strict risk management discipline.
Trade Alert - (GLD) – STOP LOSS
SELL the SPDR Gold Shares (GLD) June $207.50-$212.50 vertical BULL CALL debit spread at $3.95 or best
Closing Trade
6-11-2024
expiration date: June 21, 2024
Portfolio weighting: 10%
Number of Contracts = 25 contracts
When economies turn, you often get a lot of flip-flopping data. That was the case on Friday when, after a long series of consistently weak economic data, we were delivered an incredibly hot May Nonfarm Payroll Report, double expectations.
That has taken the shine off my gold trade, at least temporarily. With only 7 trading days left until the June 21 option expiration, the risk/reward is no longer favorable. I also hate going into big numbers, like tomorrow’s CPI report, with only a small safety margin.
I am a firm believer in stop-loss discipline. I always stop out when we cross the upper strike price and a loss hits 2% of capital. We reached that point at the Friday close.
Therefore, I am selling the June 2024 $207.50-$212.50 vertical BULL CALL debit spread at $3.95 or best.
Do not enter a market order on pain of death as spreads are wide going into expiration. Simply start at the offered side and work your way down 5 cents at a time until you get done.
The long-term bull case for gold is very simple. Falling interest rates mean less yield competition for gold, which yields nothing. China and Russia have been stockpiling gold for years to avoid international financial sanctions. A global gold shortage is developing with new mine costs rising. Gold also offers protection against rising US debt, which is expected to hit $35 trillion shortly.
On top of all this, Chinese speculators have shifted their interest from real estate, which has crashed, to precious metals. This adds a large retail element that has never existed before.
SPDR Gold Shares (GLD) is a play on physical gold. They are shares in a corporation that owns 400-ounce gold bullion bars held by a London trust. It is far safer owning gold through the (GLD) than owning your own physical gold bars via a third-party custodian. If the custodian goes under, which is frequent, your gold is gone. With (GLD), your credit risk is with State Street, a highly-rated firm with a strong balance sheet.
For details about SPDR Gold Shares (GLD) please visit their website at https://www.spdrgoldshares.com.
This was a bet that the (GLD) would not fall below $212.50 by the June 21 option expiration in 8 trading days.
Here are the specific trades you need to close out this position:
Sell 25 June 2024 (GLD) $207.50 calls at………….….............……$7.25
Buy to Cover short 25 June 2024 (GLD) $212.50 calls at…………$3.30
Net Proceeds:………………………….………..…………................….....$3.95
Loss: $4.20 - $3.95 = -$0.25
(25 X 100 X - $0.25) = -$625.
If you are uncertain about how to execute an options spread, please watch my training video by clicking here.
The best execution can be had by placing your bid for the entire spread in the middle market and waiting for the market to come to you. The difference between the bid and the offer on these deep-in-the-money spread trades can be enormous.
Don’t execute the legs individually or you will end up losing much of your profit. Spread pricing can be very volatile on expiration months farther out.
Keep in mind that these are ballpark prices at best. After the alerts go out, prices can be all over the map.
