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« Healthcare seen as a drag on the American Economy | Main | Randgold Resources Limited Options Trade »
Friday
Jun122009

Randgold Resources Limited Options Trade Up 25% in a Day

Randgold Chart 13 jun 09.JPG

Chart courtesy of Stockcharts


The September $65.00 PUT contracts in Randgold Resources Limited (GOLD) that we purchased on the 11th June 2009 for $5.00 per contract have got off to a good start by gaining 25% to close at $6.30 today. Randgold tumbled yesterday losing 4.60% to close at $67.67.

On the 28th May 2009 we sold our entire holding of Randgold for an average price of $68.69 for a return of 82.44% as the company appeared to be overbought at the time. This stock still looked overbought to us so we sort to capitalize on the situation further via the purchase of PUTS which expire in September.

A correction of around $10.00 should see these options double in price and thats the target we hope to hit. If a 25% profit in a day or so is good enough for you then by all means take it, there is nothing wrong with taking small quick profits along the way.

Now while we are sweating and you are having a little chuckle at our exploits we can tell you right now that we may buy again early next week so watch this space.

Taking a quick look at the above chart we can see what appears to be an aberration in the performance of this particular selection of stocks. If this aberration remains in place then we will lose money on this options trade, however if the profit takers decide to cash up then Randgold could correct quickly.

Gold itself closed at $938.30 registering a fall of $16.20 on the day adding more downward pressure on the precious metal producers.

Randgold Resources Limited trades on the NASDAQ under the symbol of GOLD and on the London Stock Exchange under the symbol of RRS.

Have a sparkling day.

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Reader Comments (2)

Why are you so focused on Randgold????

June 14, 2009 | Unregistered CommenterM

M,

We see this trade as a short term opportunity due to what we perceive as an overbought situation regarding Randgold. If you use any of the metrics when making your investments decisions you will see that a stock or a commodity which has moved to an extreme relationship will correct back towards its norm sooner or later.

Look at Gold and the DOW for instance.

In this case Randgold has ran too far ahead of itself, in our humble opinion, which we tried to demonstrate by comparing it to the performance of similar stocks in this article. So we are looking for a reversion back to the norm which we think could well occur somewhere between the 50dma and the 200 mda. However we have positioned ourselves in these PUTS for a fall of about $10.00 which would return a good profit.

The focus is on Randgold at the moment but we continue to look for other trading opportunities as this window of opportunity for this one will soon pass.

June 14, 2009 | Unregistered CommenterGold Prices

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