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Wednesday, August 6, 2014

Gold August Put Options

7/22/2014 (10:29 am)

[click here to see my timing on a chart]

sold (to open) 4 August 2014 $124 puts at $1.05

received $420 cash

Reasons for initiating this trade:
  • bottom of stochastics ("oversold") (see chart)
  • price of GLD was tucked in between the two moving averages (see chart)
  • probability of success:  65%


8/6/2014 (10:44 am)

bought back all 4 puts at $0.45

NET PROFIT:  $219.79 (in two weeks)

Reasons for closing this trade:
  • GLD has been pretty volatile the last two weeks
  • my strike price is just barely out-of-the-money
  • 9 days left until expiration (anything can happen)
  • TAKE PROFITS!

LESSONS:

I normally close (buy to close) my short puts when the stochastics are at the top, but in this case, with 9 days left, I decided to just take my profits and remove the risk from my portfolio.

GLD was trading between $125.47 and $126.43 on 7/22/2014 [when I sold (to open) my puts].  If I had BOUGHT 400 shares of GLD instead, I would have broken even on 8/6/2014 (when I closed my puts). 

That's why I prefer to SELL PUT OPTIONS.  I make money even if the underlying goes sideways.
 
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