GLD To Fall To 150

The gold bullion had been in a long term uptrend during the past 10 years rising up to 200% during that timeframe. Gold peaked during September of 2011 and has been rangebound since. In this article we will cover how to profit from the GLD ETF during this period of consolidation. Lets look at the chart before we suggest a profitable strategy.

GLD ETF

GLD ETF

As you can see during September of 2011 GLD reached its peak at around 190 after briefly going parabolic. Since then GLD started trading within a range between 150 and 175. This is a wide enough spread to make some easy money by trading the resistance and support levels accordingly.

Profiting from options

One way to profit from this range is to buy deep in the money options with little to no time premium when the security is trading near 150 and sell those contracts when the security gets above $170. If you want to supersize your profits and you dare to take on the extra risk then also sell a naked $175 call. Be sure to close out the position if GLD breaks above the $175-$178 resistance zone. Another thing you can do is sell a $150 or below naked put contract when GLD is trading near 150 (once again this is another risky strategy you can use to supersize your profits so be sure to have an exist strategy in place, a close below 147 would be a good place to close out the position if the trade goes wrong)

Posted Monday, February 18th, 2013 under Options, Specific stocks, Technical Analysis.

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