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« The Week of the Record Gold Price | Main | Gold at All Time High »

Randgold Resources Limited: A Few Call Options

Randgold Chart 09 Oct 09.JPG

Today we took the plunge and purchased a few Call Options on Randgold Resources Limited (GOLD) they are the December 2009 series with a strike price of $80.00 (GUDLP) and we paid an average of $4.70 per contract for them. Todays trading range was between $4.30 and $5.00 per contract.

Our rational is based on gold itself having broke through its old high of $1033/oz putting it into unchartered waters where it really could go anywhere, as we write it is trading at around $1056.00/oz. The driver behind gold is of course the plight of the dollar which is struggling to hold its own at the moment.

We chose Randgold as the vehicle for this play as it is fairly sensitive to any movement in gold prices. Taking a quick peak at the chart we can see that Randgold is trading at $74.00 and is close to its previous high of $76.08, if it can get above its previous high then it too is in unchartered waters and could move higher quickly. The other point of note is that the MACD is very close to making a golden crossover, where the black line crosses the red line in an upward motion, which is usually very positive for the stock.

On the downside we would prefer the technical indicators to be starting from a lower point on the chart to feel more comfortable with this trade, but it is difficult to find the perfect set up. We also need to be weary of the gap that has opened up between the stock price and the 200dma, again we would prefer this gap to be lot smaller.

If you follow us into this sort of trade then make sure that you can live to fight another day should things turn to custard, as always go gently as this is a highly speculative and dangerous play.

Any thoughts or comments on how we could do better are always welcome so please let us know.

Have a sparkling day.

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Reader Comments (4)

That's a pretty gutsy move. I know it's easy to say in hindsight but the time to have made the trade was when the STO was below 20% a few days ago. You're in no-mans-land right now and, even though I think the trade will work eventually, I reckon you may have a few anxious days ahead. Will you bail or hang in if things go the other way?

October 9, 2009 | Unregistered CommenterPaul Dransfield


Yes indeed, a white knuckle week ahead, if it goes pear shaped then we may cut and run, the market being stronger than our wallet. If the dollar recovers it will cap gold prices momentarily, however that would damage this position as the time premium erodes the value faster than a speeding bullet.

As you know we are about 85% invested so we are risking small amounts on these trades and have tried to stress just how dangerous they can be to ones financial health. If we cant sleep then we have put too much in, so we do go gently.

We take your point especially about the STO, but we were hoping that a crossover on the MACD would outweigh the STO and send the stock higher.

Thanks for your comments and please keep em coming as they are very much appreciated.

October 9, 2009 | Unregistered CommenterGold Prices


How do I know which option holdings you have right now OR which one should I buy now?


October 12, 2009 | Unregistered CommenterN

These are the only contracts that we have open at present on gold prices however we do have some contracts on SSRI which is on, go gently with them and bide your time.

Best wishes,

October 12, 2009 | Unregistered CommenterGold Prices

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