OPTION TRADE OF THE DAY!
July 27, 2009
December Gold- Our charts are showing that the market could and should attempt to take out the 1,000 level in the next few weeks or at least months. We like the December 970/1000 call spread with an 870 put as the naked leg. The trade is currently looking like a small credit of $200 which means that as long as the market stays above 875 the risk is minimal. The risk under 870 is unlimited while the profit potential is limited to $3,000, plus the credit minus transaction costs of three legs.
December Silver also looks as if it could and should be making a run for the highs or at least attempt to fill the huge gap on the chart from 1445 to 1486. We are buying the December 1450/1550 call spread and selling the 1250 put as the naked leg. The trade is a $500 credit which means that the reverse breakeven is at 1240, so from 1240 up your risk is limited, below 1240 you have unlimited risk. The profit potential is limited to the call spread which would be 5k plus premium minus commissions. If the risk of selling the 1250 put makes you nervous, sell the 1200 or the 1175.
* There is a substantial risk of loss in trading futures and options.
PLACING CONTINGENT ORDERS SUCH AS “STOP LOSS” OR “STOP LIMIT” ORDERS WILL NOT NECESSARILY LIMIT YOUR LOSSES TO THE INTENDED AMOUNTS. SINCE MARKET CONDITIONS MAY MAKE IT IMPOSSIBLE TO EXECUTE SUCH ORDERS.
Past performance is not indicative of future results.
The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction.
FOR CUSTOMERS TRADING OPTIONS, THESE FUTURES CHARTS ARE
PRESENTED FOR INFORMATIONAL PURPOSES ONLY. THEY ARE
INTENDED TO SHOW HOW INVESTING IN OPTIONS CAN DEPEND ON
THE UNDERLYING FUTURES PRICES; SPECIFICALLY, WHETHER OR NOT
AN OPTION PURCHASER IS BUYING AN IN-THE-MONEY, AT-THE-MONEY,
OR OUT-OF-THE-MONEY OPTION. FURTHERMORE, THE PURCHASER
WILL BE ABLE TO DETERMINE WHETHER OR NOT TO EXERCISE HIS
RIGHT ON AN OPTION DEPENDING ON HOW THE OPTION’S STRIKE
PRICE COMPARES TO THE UNDERLYING FUTURE’S PRICE. THE FUTURES CHARTS ARE NOT INTENDED TO IMPLY THAT OPTION PRICES
MOVE IN TANDEM WITH FUTURES PRICES. IN FACT, OPTION PRICES MAY ONLY MOVE A FRACTION OF THE PRICE MOVE IN THE UNDERLYING
FUTURES. IN SOME CASES, THE OPTION MAY NOT MOVE AT ALL OR
EVEN MOVE IN THE OPPOSITE DIRECTION OF THE UNDERLYING FUTURES CONTRACT.
Paul Brittain
Commodity Trading School
877-270-8403
