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|Subject: Re: Gold - Updated TA||Date: 11/11/2012 9:00 PM|
|Author: MDCigan||Number: 41178 of 41316|
Looks like Gold had bounced off the 200 DMA as expected. I was too busy following election and getting diverted with political posts and completely missed this.
Yeah, I missed it as well. It didn't quite kiss it with the daily low hitting 1672.50 while the 200 DMA was a 1664 that day. For me, that is always the tough call...when do you enter. It is a balance between the lowest risk entry point possible versus missing the entry point. I'm just guessing but I think another pullback and sideways consolidation is likely.
Given the fiscal cliff and all other uncertainties I am hoping Gold will not crash. I am thinking about credit spread.
I can buy $145 put Jan expiration and sell $155 put for 3% return on capital at risk or $155/$160 for 17.5% return.
The $145/150 gives me 10% downward protection for 70 days to expiration with 200DMA in between for support looks interesting bet even though 3% simple return and 15% annualized return is is not so great but okay.
Any thoughts, suggestions?
Generally speaking, I like credit spreads. I was actually doing very well trading credit spreads before I decided to move to futures for the increased leverage which hasn't worked out too well so far so I'm probably going to move back to credit spreads. They are more forgiving in that even when you are wrong, you can often get out with a scratch trade or small loss. With futures, if you stop out 1-2 points below your stop out point, you've already taken a pretty big hit. With credit spreads, you usually have already burned through some time value, and the short option may not have a high enough delta to really gain much value for only 1-2 points below the short strike.
When I do trade credit spreads, I usually like to choose the short strike based on some key technical level. That way if you know it is violated, you exit immediately. The math of credit spreads doesn't work well for overall positive expectancy if you take the full loss on too many. You could have 12 out of 15 winners, and if you take the full loss on 2 that might wipe out all your profits.
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