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View Full Version : Gold Option straddle?



jpatter666
09-03-09, 10:58 AM
Obviously gold is making a run at 1000 again. I'm thinking that we're going to finally break 1000 and stay there or take a dive again to 900 or so.

Might an option straddle be worth considering here? I think either way we might see some significant movement.

On another note, if the equity takedown EJ is calling for happens, what do people think will happen to gold? Will it get sold off for liquidity as it was before? Or will people desperately pile into it thinking the end is nigh?

Might be worth another longer-term straddle.....

ricket
09-03-09, 12:53 PM
Obviously gold is making a run at 1000 again. I'm thinking that we're going to finally break 1000 and stay there or take a dive again to 900 or so.

Might an option straddle be worth considering here? I think either way we might see some significant movement.

On another note, if the equity takedown EJ is calling for happens, what do people think will happen to gold? Will it get sold off for liquidity as it was before? Or will people desperately pile into it thinking the end is nigh?

Might be worth another longer-term straddle.....

According to him there is no correlation between equity and gold prices.

ST
09-03-09, 01:20 PM
On another note, if the equity takedown EJ is calling for happens, what do people think will happen to gold? Will it get sold off for liquidity as it was before? Or will people desperately pile into it thinking the end is nigh?

Might be worth another longer-term straddle.....

Yeah, I'm sure you know iTuilip's stance - correlated to a third variable - confidence in the US gov't. Personally, I think a market panic, at this point, yield a rush into dollars and sees gold take a dive. I think traders will take their cue from the last downdraft and expect gold to drift down to the $700s again (http://finance.yahoo.com/charts?s=GLD#chart4:symbol=gld;range=2y;compare=%5 Egspc;indicator=volume;charttype=line;crosshair=on ;ohlcvalues=0;logscale=on;source=undefined)

Similarly, its doubtful that the market would go from a feeling of recovery straight to stagflationary mindset - rather I think its likely that the market panics, screams deflation, everything down, dollar up, then on the next reflation, slowly a realization that stagflation is here to stay - maybe by summer. I believe the iTuilip stance during this period to be - 'who knows or cares what happens to gold in that short time frame'.

I think this will provide an excellent window of opportunity for speculative money in certain equities that will be flocked to upon stagflation realization - but this is going to take a while to develop, if it does at all.

jpatter666
09-03-09, 01:36 PM
According to him there is no correlation between equity and gold prices.

And I quite agree. What might be more interesting is the question: what is the correlation between gold/PMs and a stock panic? Very short term event, but might force PMs down simply because traders sell them to raise liquidity because everything else is down hard.

I suppose it would depend on the nature of the event forcing stocks down. If it is seen as deflationary, I'd expect gold to drop as it did last year. If inflationary, the opposite.

goadam1
09-08-09, 07:24 PM
Finister sees a drop in the value in the dollar equals a rise in other values. It's one linear way to look at things. Or Metalman will talk about dollar negative equals a rise in commodities. I see a variation on the last inflationary bubble but without housing to chase. Money looks for stuff to do. It looks for return. There are more dollars than can be made into real profit. Where can you get some profit? Where can you store some wealth? It's a short list. Gold looks pretty good to people looking for a place to put old dollars while more new dollars keep rolling of the presses. But the crowd is fickle.

Also, if I hear one more prediction for everything down and then it goes up again!

Leverage is low. No Lehman Brothers. Just too much paper and not enough for it to do.