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« Randgold Resources Limited Options Up 100% in one Month | Main | A 20-Year Bear Market? »
Sunday
Jul122009

Randgold Resources Limited Options Trade Exit Strategy

Randgold Chart 11 July 2009.JPG

Chart courtesy of Stockcharts


Our Randgold Resources Limited (GOLD) Options Trade is Up 88.00% since our purchase on the 11th June 2009 when we purchased the September $65.00 PUT contracts in Randgold Resources Limited in anticipation of a pullback for $5.00 per contract. We now need to implement an exit strategy for this trade.

The symbol for this contract is GUDUM and it closed on Friday with the bid at $9.40 and the asking price at $9.60. As we can see from the chart above the trend is still down for Randgold however the gap between the stock price and the 200dma is closing. Also note that the technical indicators are no longer in the overbought zone as they were when we made the purchase and they are now suggesting that this stock is oversold.

Randgold closed at $58.73, however, we still think that it has further to fall and could go as low as $50.00 before coming to rest. As it stands we are sitting on a paper profit of around 88% on our outlay which has been generated in exactly one month. The market has been good to us so we have decided to place a sell order at $10.00 on these PUT Contracts which we hope is achieved next week, if not will we re-evaluate the position over the coming weeks.

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

The time is drawing close when the situation will reverse with gold and the gold producers heading north, so the possibility could well present itself whereby we purchase CALL Contracts on some of the beaten down gold and silver stocks. You may want to start looking at the charts for stocks that have been oversold and set some parameters such as entry points, exit points, capital outlay, etc, that you are comfortable with.


As an example take a look at Agnico-Eagle Mines Limited, one of our favourites, the stock price has been beaten down and is now close to its 200dma with the technical indicators heading for the floor. Investors in the silver space might want to take a look at SLW and SSRI a couple of stocks that have lost 40% or so of their value recently.

We hope that these ideas help you to formulate your own strategies and investment plans in these unusual financial times.

Next week we are off to Auckland to meet with an investor who does a lot of work in China and another colleague who is heavily involved in the dairy industry so we hope to glean their views on the economy etc. We will touch base from time to time but will not be able to write too much as the Chardonnay will no doubt interrupt normality.

Any thoughts – then please fire them in.

Have a sparkling day.

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Reader Comments (2)

Hello,

I have some knowledge of candlesticks and use MACD, but I cannot find a reason to close the puts on Randgold, even if it proves a good and profitable moment to do so. Can you state what factors and chart pattern suggested it was the right time to do so. Thanks regards Ryszard

July 16, 2009 | Unregistered CommenterRyszard

Hello Ryszard,

We decided to close the trade because our objective was achieved. The PUTS had doubled in price in a month so we took the profit and retreated to the sidelines.

We sold GUDUM at $10.00 and today it is down to $6.80, we are watching it and may well buy it again, however if you look at todays chart you will see that the technical indicators are not in the overbought zone as they were when we suggested this trade and therefore the likelihood of success has diminished.

However Rangolds trend is still to head south so we wish you luck with your trade and you have until September.

July 16, 2009 | Unregistered CommenterGold Prices

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