We have been bearish on gold and silver since the beginning of the year and as a result all of the trades that we have closed have been at a profit, including 212.50% on HL puts. This week we have continued that winning streak, closing two more profitable trades. Our view has been that gold will steadily grind lower in the absence of more QE from the Federal Reserve.
Short selling a GLD vertical call spread allowed us to take advantage of falling gold prices and at the same time would have a positive theta, meaning that we did not need sharp drops in the gold price in order to make a profit. With this in mind we issued a trading signal on March 12th “to sell GLD Sep 21 '13 +$155/-$150 Call Spread at $2.70 net credit with 5% of our capital allocated to this trade”.
When gold had its largest fall in COMEX history on April 15th we made significant gains on many of our open trades, two of which were closed that week after more than doubling in value. This dramatic drop in gold prices saw this position considerably increase in value and we could have closed it then and there, however, given that this type of trade increases in value as the expiration date approaches, we decided to hold it instead, taking profit on some of our more aggressive shorts such as our 175% return in 4 days.
Gold rallied through the latter half of April before meeting resistance around $1475, at which point we decided to increase our short exposure. We believed that gold would steadily grind lower after its sharp drop and bounce in April, and therefore believed that adding to our current call spread position on GLD offered considerable risk reward dynamics. On April 27th we allocated 10% of our portfolio to the short call spread trade, tripling our position, signalling our subscribers to open the trade with a net credit of $1.08.
Gold traded down to support at $1350 in May and failed to break that level for as long as we held these positions. The result was increasing profits for SK Option Trader subscribers, as each day the loss of time premium raised the value of our short positions. The call spread dropped to a value of $0.29 on June 17th, prompting us to close the positions and take the considerable profits that were showing on both. The first trade that we opened banked us a gain of 104.48%, and the second 20.15%.
This year we have closed 13 trades, all of which have been at a profit with many more than doubling, which have brought our year to date return on closed trades up to 45.49%.
Our model portfolio has returned a total of 655.09% since its inception nearly 4 years ago, and of our 126 trades 87.3% have been profitable. We are currently making considerable gains from the decline in gold prices, and will be swiftly allocating the gains from these trades to continue this trend. If you want to find out how what trades that we will be making next then all you have to do is sign up via the buttons below.
Subscribe for 6 months- $499
Subscribe for 12 months- $799