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March 20, 2013

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Let's trade...Gold by using options in GLD ETF

Despite the fact that I continued to trade options I didn't made any blog post in a while and I felt responsible today... I will make a quick intro into my last trade. The beginning of the year was one which involved allot of fear that the stocks are going to crash and in times like this the gold begins to feel to investors as safe heaven. In parallel Options implied volatility jumped higher. At the time of this post the S&P 500 futures decreased just 1.75% after it was down more than 10% from the beginning of the year. By comparison, Gold this week was at one point up more than 20% from the start of the year. The one month correlation between the 2 is negative .57%. The Implied Volatility and Implied Volatility Rank presents a decent opportunity to sell the volatility as one can see just below: Trading opportunities considering Implied Volatility Implied Volatility Chart Now if I take a look at the gold's ETF GLD, it's obvious that we have an inverse s...

Is the right time to buy gold?

Alright, it's a fair question. Stocks are down big, Santa rally it seems like is not gonna happen this year, despite the fact that there was around 70% probability for this...so what now? Maybe bitcoin? Just joking :) Like I said, let's dive into how to approach the gold idea. First, let's see what's the correlations with different symbols and get a context. I looked into 6 month correlation, because there is not point in going to far in time, correlations are changing all the time but is should be far enough for somebody who wanna invest in it. In the correlation matrix from the above we can see the strong correlation between gold and silver and an inverse strong correlation between the silver and US dollar(UUP). An inverse strong correlation we have, when we take a look at the last 6 months, between gold and S&P 500 ETF. Again, is very important what one thinks that's the optimum approach for himself and look after at the adequate correlation. For ex...

Natural Gas trades using options strategies

The weather in the US is unfolding in a tough winter. And according to the Farmers’ Almanac’s famous weather outlook, it’s going to be a cold one, with plenty of snow. I know, this is nothing new, right? In fact the natural gas price started to climb better than a month a go. People would think that this train left the station and trade opportunities failed already. Maybe if one trades directional, but there are plenty of other ways to take a cut of this. True, one needs to dig deeper and things get's more complicated... First opportunity is in the futures market. Look at the expiration months and you'll see that natural gas price are in backwardation. That means front month prices are more expensive than back month, implying that current demand is more stronger than supply. So, this is a way of approaching this. Natural Gas prices in futures market Second opportunity and my favorite is in the natural gas ETF, UNG. Implied volatility is at 84% and IV rank( the ...

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