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Greg Loehr has been active in the options trading industry since 1990 when he first began working for the preeminent proprietary options trading firm Susquehanna Investment Group. Loehr began his career on the floor of the Chicago Mercantile Exchange in Susquehanna’s FX futures and options... More
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  • Three Reasons To Love GLD Volatility 0 comments
    Jul 30, 2013 7:09 AM | about stocks: GLD

    In today's Daily Buzz free chat we spent some time discussing GLD and the potential for a move that could be profitable for a strangle. For those that missed today's chat, or for those just looking to learn more behind this potential trading idea, I thought I'd fill in a few details.

    There are three main reasons why I like this trade, and you can see two of them on the chart below:

    (click to enlarge)

    GLD daily chart with implied volatility

    The first is that the stock has been consolidating. We've seen this setup many times before with this stock (I know, I know...it's really an ETF, but who cares?), and just last week we found a strangle that profited 50% in less than four days. That's that gap you see about six bars from the last.

    But it's not just stock consolidation, and the idea that the stock might be getting ready to move, it's also about the implied volatility of the options. This is the second thing that I like about this trade. You just shouldn't trade a strangle, or any option for that matter, without first considering and understanding the implied volatility.

    If you compare today's levels with those back in early April, then today's levels seem high. But I think we're in a 'new normal', at least for a little while longer; and today's volatility looks cheap compared to late April and late June. I discussed this in greater detail during our Live Trading Session today.

    Finally, the third reason you might want to own some GLD volatility is the data and announcements coming out this week. There's ADP employment, the Fed meeting, and non-farm payrolls on Friday. That's a lot of stuff. Putting it all together, and I think GLD volatility is a 'buy.'

    Trade safe!

    Greg Loehr

    Broken Wing Butterfly Training

    Disclaimer: Loehr Consulting, LLC ("Company"), doing business as Options Buzz, is not an investment advisory service, nor a registered investment advisor or broker-dealer and does not purport to tell or suggest which securities customers should buy or sell for themselves. Before placing any trade you should consult with a licensed broker or registered investment advisor as well as read The Characteristics and Risks of Standardized Options. Please visit www.OptionsBuzz.com for the complete disclaimer and terms of use.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Themes: volatility Stocks: GLD
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