Welcome to NexusFi: the best trading community on the planet, with over 150,000 members Sign Up Now for Free
Genuine reviews from real traders, not fake reviews from stealth vendors
Quality education from leading professional traders
We are a friendly, helpful, and positive community
We do not tolerate rude behavior, trolling, or vendors advertising in posts
We are here to help, just let us know what you need
You'll need to register in order to view the content of the threads and start contributing to our community. It's free for basic access, or support us by becoming an Elite Member -- see if you qualify for a discount below.
-- Big Mike, Site Administrator
(If you already have an account, login at the top of the page)
I'm not in any GC at the moment but I'm really curious as to how folks might handle a major move like this if they were in GC puts. Obviously having free cash for margin is adviseable.
I haven't dug much into the fundamentals but from a technical perspective GC broke down out of a significant sideways channel on a weekly timeframe. The next support level on the weekly is the 1300/20 area. Beyond that is the 1250 area which is an approximate 50% retracement from the August 2011 high/October 2008 low.
Also it seems interesting to me that we are at the top of a major multi-month channel on the US dollar and approaching the 2007 highs in the S&P.
Can you help answer these questions from other members on NexusFi?
Funny you should post this, because I was thinking this Gold plunge would be a great case study for selling options.
If I can get the right data (I asked Ron for help with some of it), I'll put together a story of Gilbert Goldoptionseller, my friend who sold a couple of Gold Puts at Thursday's close...
Given how the implied volatility has gone up on both /CL and /GC why would you not consider selling deep OTM calls now then get out when things settle down?
Just asking for my ongoing education.
Thanks
V
I'd like to add a few thoughts and curious what you think.
Early yesterday was obviously a much better spot to to take a short call position in /GC but for the this discussion lets assume the position was put on sometime today or even tomorrow.
Why sell the 1820 calls when the 1600's have a 95%+ probability of expiring worthless.
With such a significant break on huge volume there is also new information that makes a push back above 1500 much less likely.
Margins went up but so did implied volatility and premiums. So if /GC does grind higher after the short call position is on volatility would likely contract from these extremes hedging the delta loss nicely and letting theta do its thing. A down day or two at some point and the position is very nicely profitable.
Just too much volatility not to sell and who really want to be short puts here?
I wasn’t able to get 1.4x excess, I must have misunderstood something. Can somebody check this calculation, please.
If we use 2x excess until 14 DTE, then 0x excess from day 7 until expiry and if the entry was at 56 DTE we would have:
56-14 days x 2 = 84
14-7 days x 1 = 7
7-0 days x 0 = 0
And the average excess would be (84 + 7 + 0) / 56 = 1.625
So that’s ( (DTE – 14 x 2) + (7 x 1) + (7 x 0) ) / DTE
It gives 1.65 excess at 60 DTE, and 1.58 excess at 50 DTE etc
I had used a log scale calculation when I came up with 1.4. So the excess wasn't strictly dropping at 14 DTE and 7 DTE. It was a more gradual drop.
That more matches what I do because there are some options that I drop the excess sooner because I am so far OTM. For example, ESj3 1200p I moved to 1X excess at 24 DTE and zero excess at 14 DTE. Using 60 DTE that gives you 1.37.