It would seem logical that the precious metals should be moving a lot higher after the FMOC announced its latest QE program. It is expected that a declining dollar would directly lead to higher gold/silver prices. Some people believe that precious metals are being manipulated based on the high correlation between sharp price moves in gold and silver and moves in the Comex gold/silver futures. The recent sharp sell-offs have initiated in the more illiquid periods of overnight electronic trading during Asian market hours and always right as the Comex floor opens. This activates the stop-losses programmed into the large hedge fund computer algorithms and starts a chain reaction know as a 'waterfall' - this has occurred every day this week on the Comex. Eventually precious metals will bounce back as the large hedge funds liquidate a large portion of their long positions and the commercial segment (largely the so-called bullion banks that make active markets in gold/silver futures, among other bullion market functions) will cover their short positions and bid up prices. Also note that this technical break-down in precious metals has occurred during the most recent option expiration weeks and if form holds true, then prices should be expected to bounce back before the end of the year.
GLD Position Update -----------------------------------------------------------
GLD closed at $159.73 on Thursday â€“ the December position is approx. $500 in the red
The November 13th Couch Potato published a December expiration GLD put spread
The technical breakdown in gold prices suggest it is would be risky to attempt a trade adjustment. We need to mitigate the loss and close out this position for an approx. $1,500 loss prior to the close of trading tomorrow which is expiration day. (see tables below)
As mentioned above we expect to exit the December expiration GLD put spread tomorrow. If gold prices gap down at the open it is usually best to immediately execute the closing trade. Otherwise, if the price recovers a bit you can hold off until later in the day to attempt to get a better price. The $161 strike price short contracts need to be closed out prior to the end of trading tomorow to avoid being assigned.
Couch Potato Trader Disclaimer
All results reported in this section are hypothetical. While the numbers represented here may have been achieved or beaten by our readers, we make no representation that any individual investor achieved these exact results. The tracking for the plays listed in this section uses closing prices for the day the newsletter is published and it is not meant to imply that any reader actually received those prices (though many often do) or participated in these recommendations (even though many do). The portfolio represented here is hypothetical and for investment education purposes only. It is only an illustration of what type of gains a knowledgeable trader might receive utilizing these strategies. If you don't get close to these results, guess what. It isn't the fault of the strategies.