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 - (GOLD) – EXPIRATION AT MAX PROFIT
EXPIRATION of the Barrick Gold (GOLD) January 2023 $15.50-$16.50 in-the-money vertical Bull Call spread at $1.00
Closing Trade
1-20-2023
expiration date: January 20, 2023
Portfolio weighting: 10%
Number of Contracts = 120 contracts
Since (GOLD) shares for this spread are now an amazing $3.26, or 20% in the money, I think it’s safe to call this one a win even though we have four more hours until expiration.
We have the good fortune to have six options positions expiring at their maximum profit points at 4:00 PM today. So, you don’t get overwhelmed by getting six trade alerts all at once, I will start feeding them out now.
As a result, you get to take home $1,560, or 14.94% in 13 trading days.
Well done and on to the next trade.
You don’t have to do anything with this expiration.
Your broker will automatically use your long position to cover your short position, canceling out the total holdings.
The entire profit will be credited to your account on Monday morning, January 23 and the margin freed up.
Some firms charge you a modest $10 or $15 fee for performing this service.
With the world looking for a “safe” trade, it is time to pour into precious metals. The Bitcoin bubble had been stealing their thunder until now is gone forever
Gold has just completed a major upside breakout and looks to go higher. The “Head and Shoulders” bottom is in.
The drivers are overnight US interest rates that will fall sharply in the second half, stockpiling by foreign central banks, and a recovering US economy by then.
See below my in-depth research piece on “Five Reasons Gold is Going to a New All-Time High.”
This was a bet that Barrick Gold (GOLD) would not fall below $16.50 by the January 20 options expiration day in 13 trading days.
Here is the specific accounting you need to close out this position:
Expiration of 120 (GOLD) January 2023 $15.50 calls at…………........………$3.21
Expiration of short 120 (GOLD) January 2023 (GOLD) $16.50 calls at…..$2.21
Net Proceeds:……………………..…….………..…………....................…………........$1.00
Profit: $1.00 - $0.87 = $0.13
(120 X 100 X $0.13) = $1,560, or 14.94% in 13 trading days.
5 Reasons Gold is Going to a New High
Gold has just broken out to a new one-year high. And here’s the good news. It’s only just begun.
Shunned as the pariah of the financial markets for years, the yellow metal has suddenly become everyone’s favorite hedge.
Now that gold is back in fashion, how high can it really go?
I was an unmitigated bear on the price of gold after it peaked in 2011. In recent years, the world has been obsessed with yields, chasing them down to historically low levels across all asset classes.
But now that much of the world already has, or is about to have negative interest rates, a bizarre new kind of mathematics applies to gold ownership.
Gold’s problem used to be that it yielded absolutely nothing, cost you money to store, and carried hefty transaction costs. That asset class didn’t fit anywhere in a yield-obsessed universe.
Now we have a horse of a different color.
As a result, the numbers are so compelling that it has sparked a new gold fever among hedge funds and European and Japanese individuals alike.
Websites purveying investment grade coins and bars crashed multiple times last week, due to overwhelming demand (I occasionally have the same problem). Some retailers have run out of stock.
So I’ll take this opportunity to review a short history of the gold market (GLD) for the young and the uninformed.
Since it last peaked in April of 2012 at $1,927 an ounce, the barbarous relic was beaten like the proverbial red-headed stepchild, dragging silver (SLV) down with it. It faced a perfect storm.
The biggest buyers of gold in the world, the Indians, have seen their purchasing power drop by half, thanks to the collapse of the rupee against the US dollar. The government increased taxes on gold in order to staunch precious capital outflows.
Chart gold against the Shanghai index, and the similarity is striking, until negative interest rates became widespread in 2016.
In the meantime, gold supply/demand balance was changing dramatically.
While no one was looking, the average price of gold production soared from $5 in 1920 to $1,400 today. Over the last 100 years, the price of producing gold has risen four times faster than the underlying metal.
It’s almost as if the gold mining industry is the only one in the world which sees real inflation since costs soared at a 15% annual rate for the past five years.
This is a function of what I call “peak gold.” They’re not making it anymore. Miners are increasingly being driven to higher risk, more expensive parts of the world to find the stuff.
You know those tires on heavy dump trucks? They now cost $300,000 each, and buyers face a three-year waiting list to buy one.
Barrack Gold (GOLD), the world’s largest gold miner, didn’t try to mine gold at 15,000 feet in the Andes, where freezing water is a major problem, because they like the fresh air.
What this means is that when the spot price of gold fell below the cost of production, miners simply shout down their most marginal facilities, drying up supply. That has recently been happening on a large scale.
Barrick Gold, a client of the Mad Hedge Fund Trader, can still operate, as older mines carry costs that go all the way down to $600 an ounce.
No one is going to want to supply the sparkly stuff at a loss. So, supply disappeared.
I am constantly barraged with emails from gold bugs who passionately argue that their beloved metal is trading at a tiny fraction of its true value and that the barbaric relic is really worth $5,000, $10,000, or even $50,000 an ounce (GLD).
They claim the move in the yellow metal we are seeing now is only the beginning of a 30-fold rise in prices, similar to what we saw from 1972 to 1979 when it leaped from $32 to $950.
So, when the chart below popped up in my inbox showing the gold backing of the US monetary base, I felt obligated to pass it on to you to illustrate one of the intellectual arguments these people are using.
To match the gain seen since the 1936 monetary value peak of $35 an ounce, when the money supply was collapsing during the Great Depression, and the double top in 1979 when gold futures first tickled $950, this precious metal has to increase in value by 800% from the recent $1,050 low. That would take our barbarous relic friend up to $8,400 an ounce.
To match the move from the $35/ounce, 1972 low to the $950/ounce, 1979 top in absolute dollar terms, we need to see another 27.14 times move to $28,497/ounce.
Have I gotten your attention yet?
I am long term bullish on gold, other precious metals, and virtually all commodities for that matter. But I am not that bullish. These figures make my own $2,300/ounce long-term prediction positively wimp-like by comparison.
The seven-year spike up in prices we saw in the seventies, which found me in a very long line in Johannesburg, South Africa to unload my own Krugerrands in 1979, was triggered by a number of one-off events that will never be repeated.
Some 40 years of unrequited demand was unleashed when Richard Nixon took the US off the gold standard and decriminalized private ownership in 1972. Inflation then peaked around 20%. Newly enriched sellers of oil had a strong historical affinity with gold.
South Africa, the world’s largest gold producer, was then a boycotted international pariah and teetering on the edge of disaster. We are nowhere near the same geopolitical neighborhood today, and hence, my more subdued forecast.
But then again, I could be wrong.
In the end, gold may have to wait for a return of real inflation to resume its push to new highs. The previous bear market in gold lasted 18 years, from 1980 to 1998, so don’t hold your breath.
What should we look for? The surprise that your friends get out of the blue pay increase, the largest component of the inflation calculation.
This is happening now in technology and is slowly tricking down to minimum wage workers. When I visit open houses in my neighborhood in San Francisco, half the visitors are thirty-somethings wearing hoodies offering to pay cash.
It could be a long wait for real inflation, possibly into the mid-2020s, when shocking wage hikes spread elsewhere.
You may have noticed that I have been playing gold from the long side virtually every month since it bottomed in January. I’ll be back in there again, given a good low-risk, high-return entry point.
You’ll be the first to know when that happens.
As for the many investment advisor readers who have stayed long gold all along to hedge their clients' other risk assets, good for you.
You’re finally learning!
