SK Option Trader continues its winning streak in 2013; closing our sixth consecutive winning trade. This time we profited from the poor performance of mining stocks with a vertical call spread on GDX.
We have long been of the belief that gold mining stocks are one of the worst performing stock sectors; this has been most evident in recent times when mining stocks have underperformed gold and have failed to rally despite equities hitting all time highs.
To take advantage of this consistent poor performance we issued a signal to our subscribers on February 12th to “sell the GDX Jun 22 '13 $49/$47 Call Spread at $0.30 net credit”.
As the graph below shows, GDX was never higher than on the day that the position was opened.
This, combined with the position having positive theta, meant that the profits shown on this position only grew throughout the time that it was held.
The fall that gold stocks have incurred since October last year was momentarily slowed as the Cyprus fiasco unfolded. However, as soon as a deal was reached GDX pushed on down and this trade showed profits very near to its maximum potential. For the maximum profit, an additional 1.76%, to be made we would have had to hold this trade for around 2 more months. Tying up 10% of our portfolio for a mere 1.76% in additional gains meant that the risk reward dynamics were no longer in our favour.
Therefore we chose to bank profits of 15.88%, signalling to our subscribers on April 3rd to “close our GDX Jun 22 '13 $49/$47 vertical call spread at $0.03”. Over the 50 day time period we outperformed the S&P 500 by more than 7 times, outstripped gold by over 20%, and gold stocks by over 30%!
It is not just this trade that is a winner, this year we are currently on a winning streak. Our 6 closed trades for 2013 so far puts our portfolio up 18.86% YTD!
Since the beginning of our service our model portfolio is up 497.33% with an annualized return of 62.89%.
Of the 119 trades closed 86.55% of have been winners; each trade averaging a return of 30.70% in 52.36 days.
Having closed this position we are looking at how to best allocate the capital now spare in our portfolio. If you want to know what positions we open and when we open them then all you have to do is subscribe via either of the buttons below.
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