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Went long Gold. For stocks I wait the earning season

Apr. 10, 2011 6:30 AM ETGLD
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Seeking Alpha Analyst Since 2010

CFA member. In this blog I put my thoughts. Work in an Italian bank in a strategist position (forex and commodities), but my true passion is the stock market.
GLD daily

This week major indexes have been quietly flattening around recent highs. The choice of selling put on QQQ would have been good.

It’s evident that investors are waiting for earning season that will officially begin with Alcoa on April 11.

Dollar continues to depreciate vs. other major currencies, a signal of “Risk on button” pushed by investors. This was confirmed by the contextually depreciation of Yen, also against Dollar as well!!

At the same time, tensions in Middle East and North Africa (together with Dollar weakness) contributed to strong purchases on precious metals. Investors don’t trust in dollar now.

About me, on Monday I closed the short on Microsoft (MSFT) at the open price. As told last week, it had all the possibilities to break below recent support but it didn’t. The previous Friday made me doubtful: I checked price at 20 minutes before closing, it was around 25.35 and I though that it was going to break down. I switched PC off and go out for the night (as here was 9.40 pm). The morning later I checked again…and what? It recovered with last minutes rally…it showed that an underlying force was in action. I closed it out and what happened this week? News about rebalancing of Nasdaq came out, with an increase of the weight of Microsoft and decrease of Apple. That’s was the clue!! Probably someone with news was buying on the weakness and my choice was wise.

I won’t buy stocks until earning season start also because I‘ll be off for half week in this one.

But I opened a trade on the Etf Gold Spider (GLD) after it broke above the resistance 140.70 with volumes. Moving averages push up and the price broke the base of an ascending triangle. The target of this figure is close to 146. I had some choices: a) buying GLD shares; b) buying calls ATM or light ITM (I excluded buying OTM); c) long call spread. The extrinsic value on the long call only was too high for my tastes, therefore I decided to open a spread to reduce volatility because my entry point was not close to the support (entered at 142,25, support was almost 1,5$ below). I waited for the pullback half day on Wednesday but I had feeling that it wouldn’t happen soon so I opened the spread:

LONG May @137

SHORT May @139

This spread gives a risk-reward of 33% if at expiration GLD will be >= 139.

With this trade I am short Vega, long Theta. I usually don’t hold this position until expiration if I reach the 90% of maximum profit before maturity. At the same time I have a stop loss place when the long call price = cost of spread.




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