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XAU - PHLX Gold&Silver Sector Index $102.27

The PHLX Gold&Silver Sector Index (PHLX:XAU) is a capitalization-weighted index composed of 12 companies involved in the gold and silver mining industry. XAU was set to an initial value of 100 in January 1979; options commenced trading on December 19, 1983. More information on the Component Issues, Weightings and Index Divisor are available here:

http://www.phlx.com/products/sectors/xaucomp.htm

The XAU is great index for traders who follow gold in the commodities markets and today the precious metal climbed to its highest level in 2005. Analysts say the outlook for gold is fundamentally "bullish" and the XAU price chart suggests a high probability of further upside activity in the coming weeks. Although the volatility in this index is a bit high for the MCM Portfolio, it certainly qualifies as a potentially viable candidate for conservative spread traders who favor the trend in gold prices. This position will not be listed in the portfolio summary.

Fundamentals: http://finance.yahoo.com/q/ks?s=^XAU&quicken=2

Chart: http://stockcharts.com/def/servlet/SC.web?c=^XAU,uu[l,a]daclyyay[pc50!c200][vc60][iut!Ub14!La12,26,9]&pref=G

PLAY (conservative - bullish/credit spread):

BUY PUT APR-90.00 XAU-PR OI=441 ASK=$0.45
SELL PUT APR-95.00 XAU-PS OI=579 BID=$0.85


INITIAL "NET-CREDIT" TARGET = $0.45-$0.55
POTENTIAL PROFIT (X 5 contracts) = $225
RETURN ON INVESTMENT (max) = 9%
COST BASIS = $94.55
LOSS-LIMIT/EXIT POINT = $96.25 (cons) - $94.50 (aggr)

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