Gold non direction yet make money, leveraging touch to spot long
Do you expect anything dramatic in gold's prices from yesterday's Yellen's rate hike except little cushion?
Apart from those 25 bps, she also alerted that it does not plan to end reinvestments of payments from its holdings anytime soon (or as they put it "until normalization of the level of the federal funds rate is well under way").
We think this certainly not a hawkish move by her as there was no reason to hold it back again and it was justifiable to balance the economy.
Although we see steep jumps in gold prices we are bullish in this yellow metal only a decisive breach above 1085.
Otherwise, we don't see significant change in long run but standing pat with our earlier estimate of dipping towards $1000 a ounce.
If you're still stubborn to hold these investments in gold but we say it is going move anywhere between above stated range for another week or so. So it is advisable to execute the following position to give leveraging effects to your portfolio.
Option strategy: Covered strangles (XAUUSD)
Let's visualize the scenario that we are holding spot god of 1000 units of T.oz and expecting gold will never move anywhere beyond the range (1085-1000). Then short a 6D out of the money (2% strikes) while shorting 1w out of the money (3% strikes) for a net credit.
The appeal from the option strategy: Covered strangles are limited returns to the extent of premiums received initially, unlimited risk options strategies similar to the writing covered ATM calls.
Since the naked put write has a risk/reward profile of a covered call, a covered strangle can also be thought of as the equivalent of two covered calls.
Caution: The main risk of writing covered strangles is that you take on the downside risk of additional accumulation of gold to meet obligation.
If the yellow metal tanks below 3% strikes that you've chosen ($1000), your owned existing positions also sink, and you've promised to buy additional units at the put strike price. It's a double whammy, well it's not a threatening note, that is only possible when underlying commodity sinks below 3% strikes of put.
Note: Please be noted that avoid misconception on trend being bullish, you can have glance on the tenor of instruments that we've chosen you'll be confirmed. (To be precise bearish trend will persist in spite of some abrupt rallies).
Apart from those 25 bps, she also alerted that it does not plan to end reinvestments of payments from its holdings anytime soon (or as they put it "until normalization of the level of the federal funds rate is well under way").
We think this certainly not a hawkish move by her as there was no reason to hold it back again and it was justifiable to balance the economy.
Although we see steep jumps in gold prices we are bullish in this yellow metal only a decisive breach above 1085.
Otherwise, we don't see significant change in long run but standing pat with our earlier estimate of dipping towards $1000 a ounce.
If you're still stubborn to hold these investments in gold but we say it is going move anywhere between above stated range for another week or so. So it is advisable to execute the following position to give leveraging effects to your portfolio.
Option strategy: Covered strangles (XAUUSD)
Let's visualize the scenario that we are holding spot god of 1000 units of T.oz and expecting gold will never move anywhere beyond the range (1085-1000). Then short a 6D out of the money (2% strikes) while shorting 1w out of the money (3% strikes) for a net credit.
The appeal from the option strategy: Covered strangles are limited returns to the extent of premiums received initially, unlimited risk options strategies similar to the writing covered ATM calls.
Since the naked put write has a risk/reward profile of a covered call, a covered strangle can also be thought of as the equivalent of two covered calls.
Caution: The main risk of writing covered strangles is that you take on the downside risk of additional accumulation of gold to meet obligation.
If the yellow metal tanks below 3% strikes that you've chosen ($1000), your owned existing positions also sink, and you've promised to buy additional units at the put strike price. It's a double whammy, well it's not a threatening note, that is only possible when underlying commodity sinks below 3% strikes of put.
Note: Please be noted that avoid misconception on trend being bullish, you can have glance on the tenor of instruments that we've chosen you'll be confirmed. (To be precise bearish trend will persist in spite of some abrupt rallies).
