As discussed in recent Couch Potato articles, the consensus is that the Federal Reserve and European Central Bank will enact stimulus programs any time now. Past stimulus action drove depressed currencies and inflated asset prices. As indicated in the chart below, talk of impending central bank intervention motivated traders to get ahead of the curve and precious metals literally leaped through the top of recent trading ranges. Monetary stimulus appears to be already baked into gold prices and traders are starting to take profits. Technically, GLD is overbought, upward momentum has ceased, and the price is flat and may be trying to turn down.
GLD Position Update
GLD closed at $167.92 on Wednesday
The August 13th Couch Potato published a September expiration month GLD bear call spread
We are closing out the bear call spread (see tables below) and rolling the position out to a September quarterly end-of-month expiration GLD iron condor and increasing the number of contracts
After the trade adjustment the total position should be approx. $800 in the black
The exit rule was triggered last week and we wanted gold prices to stabilize before adjusting the trade. As displayed in the chart above, GLD had a few opening gaps that catapulted the price through our call strikes. You are severely limited when you wake up in the morning and find that opening prices have skyrocketed above yesterdays close due to overnight futures trading. September options expire next week and as outlined above we need to close out the regular expiration call spread to avoid the chance of assignment on the $163 short call contracts. As discussed, gold prices have flattened and we are planning a September quarterly GLD iron condor trade adjustment to minimize the loss.
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.