Following April 15th and the historical movements therein, gold bounced but failed to break resistance at $1475. Having taken profits after the collapse in gold, (such as our 175% profit using GDX puts and 135% using GDXJ puts), this bounce allowed us to open short positions on the yellow metal; on May 3rd we signalled to our subscribers to “short sell DGP shares at $39.15”.
High volatility in gold has pushed the price of many options strategies up, and therefore the risk reward dynamics involved with such trades have become unfavourable in many cases. With this in mind, SK Options Trading has been considering alternative methods of generating gains from falling gold prices, one of which is using a short position on DGP.
In this particular trade the use of DGP generated additional leverage on an outright short gold position. Not only this, but the ETN allowed us to avoid the negative theta that would have been incurred through the use of puts, as well as allowing us to pass up the additional costs of buying puts on GLD. Thus the risk reward dynamics on this trade were considerably more favourable than other alternatives.
Those of you who are familiar with recent trading in gold will know that gold has failed to mount any kind of rally through May, and in fact fell for 7 trading days in a row between the 9th and 19th. These movements greatly benefitted our position, yielding us our 12.64% profit in just 18 days.
On May 20th gold had its first positive trading day in over a week and thus decided to exit our position. May 21st therefore saw us signal to our subscriber to “close our DGP trade at $34.20” with the view of opening a similar position should gold return to more favourable levels. If you want to know when this is, and if/when/how increase our short gold position in the future then all you need to do is become a subscriber.
This trade has pushed our total returns since inception up to 612.47% with 87.1% of our trades being closed at a profit. To date our service has yielded an annualized return of 67.72% and an average profit of 32.40%.
All of our trades in 2013 have been closed at a profit, each of them yielding an average of 63.04% in 24.36 days. The question you should ask yourself is, have I done this well? If the answer is no, and you want to know what we have done to generate these returns, all you have to do is click subscribe on either of the buttons below.
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