Kelly: Sold AUY Jan 2009 $10 Calls

Friday afternoon I decided to sell my (AUY) $10 LEAPs at a premium of $7.20, netting a very nice 65% gain. Earlier I had said that I was thinking of shorting the (GLD) to hedge out my gold exposure, but after giving that second thought, I decided that I really didn’t want to get in front of gold quite yet, but the bigger caps were starting to look just a bit tired. Additionally, I saw the juniors begin to get a bid for the first time, and that has me thinking that the run in the bigger caps like AUY and (ABX) might be plateauing or topping out for a while.

Given all of that, I decided that selling my AUY calls was the best course of action, because it allows me to maintain exposure long gold through the juniors, but also protects me a bit more against a correction in the gold price. I don’t feel like a correction is coming on Monday, but at some point we are going to unwind the sell equities and buy gold trade, and I feel like we’re getting close to that point of reversal. I want to be ready to capture the reversal when it happens, and selling my AUY calls gives me more flexibility to do that.