Whatever your geopolitical, global macro, moral, or ethical concerns are about the price of gold and its implications about the US dollar, the Fed, the US Economy, etc — the only truth is price.
And price is telling us that Gold is setting up for another run higher.
Sorry if that conflicts with your world view?
In our recent RPP Report, Steve Strazza shared this chart of the Gold Miners ETF $GDX:
Does this look like an instrument that is itching for lower prices?
Steve goes on further to say:
After consolidating for about two months, Gold Miners look ready to make their next leg higher. If we’re above 40, we want to bet on a move towards 55 over the next 3-6 months.
I buy this.
To take advantage of our 3-6 month price target for $GDX to $55/share, we’re entering a Bull Call Spread in March options.
Here’s the Play:
I’m buying a March 45/55 Bull Call Spread for approximately $2.50. This means I’ll be long the 45 calls and short an equal amount of 55 calls for a net debit. March expiration gives us plenty of time for the thesis to play out.
We’ll look to sell this spread for a profit at $6.25 or better if we get the opportunity. Better to be opportunistic and take a quick profit than to hold all the way to March expiration and risk any open gains turning into a loss.
Our risk management level for $GDX is $39. Any close below that level and we’ll look to exit the spread to limit our loss — if possible. Either way, our risk is defined in this spread. The most we can lose is the debit we pay up front to enter. As such, my position will be sized accordingly.
If you have any questions on this trade, please send them here.
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