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Precious metals miners prepare for another beating after June non-farm payrolls topped...

Precious metals miners prepare for another beating after June non-farm payrolls topped estimates, sending the dollar higher and gold prices tumbling. GDX -2.7%, ABX -2.8%, AU -5.3%, NEM -1.9%, GG -2.9%, AUY -4.2%, SLW -2%, KGC -3.7%, GOLD -2.9%, EGO -3.4%, AEM -3.1% premarket.
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Comments (3)
  • Investor Talkroom
    , contributor
    Comments (524) | Send Message
    Look at the treasury yield.
    Inflation is coming. Inflation never comes when everything is bad. The inflation dragon comes when things get better.
    5 Jul 2013, 09:45 AM Reply Like
  • PM's Rock
    , contributor
    Comments (152) | Send Message
    Yes, we all need to trust a system that rewards speculators and crushes savers. We all need to rethink basic economics. I guess 20 trillion in debt and QE to infinity is meaningless. Why would anyone hold a tangible asset? I am guessing I will once again be censored in a pay to play system.
    5 Jul 2013, 10:25 AM Reply Like
  • jmack2
    , contributor
    Comments (14) | Send Message
    In lieu of holding the miners through this most difficult period of decline, I would suggest looking at holding the under priced call options or using the 1:2 ratio approach in the use of a call spread with a Jan/Feb expiration. In this respect, you can continue to profit if the stocks decline materially by rewriting the spread at a lower level by purchasing back the long end of the spread and then write the new spread. (e.g. if you owned AUY Jan $14 calls over the Jan $20 calls then assuming you bought 10 of the $14 and sold 20 of the $20 with further significant declines you could buy back the Jan $20's and then do the Jan $9 over the Jan $14 taking advantage of already owning 10 of the Jan 14's to do a Jan $9, buy 10, and sell 20 of the Jan $14 (10 to open and 10 to close) This approach is one of the few ways in which you can use the options as stock substitutes and significantly limiting the amount of money in the market at risk. This works particularly well when the VIX is in its lower range reducing premiums if you want to hold the calls outside of the spread as stock substitutes. Options of this nature in the above described trade is one of the few investments that can still be profitable even if the net movement in the stock may be as much as a 30-50% decline and then receive a year end rally raising the price back up by 10-30% in the options. Remember, limiting loss exposure and diversifying over a number of the miners in a number of precious metals areas makes for a good nite sleep. Realize that there is a maintenance requirement that varies by the industry in which cash or valuation requirements are imposed for the use of the spread in the event you are not doing a simple one to one spread. (always obtain and learn the cash requirements as it varies as well on the use of leveraged products as the investment vehicle)
    5 Jul 2013, 11:21 AM Reply Like
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