Ok, Gold looks good. but then again it has done the last 3 times we attempted to clear out $1,750.
What surprised me was how gold held so well during last weeks crazy Equity melt up post the Non Farm Payroll beat by a whopping 10.5m jobs. If ever there was a time that gold would have succumbed to heavy liquidation, that was it.
We are now once again back at the $1,750 mark and whilst I am bullish, the accumulated length in the market makes buying into strength particularly frightening.
The market has a habit of reaching a level where it gets sticky and finds itself having to put a lot of work in to break through. the recent price action reminds me of the $1,450 area back in August 2019 and again the $1,700 area back in march. Both times the market managed to clear out this levels ands rallied 7.8% and 5.2% respectively in the 2 weeks following.
One way to play the breakout is Via options. For August Expiry I would look to buy the $1,775 call for $18.75 and sell (equal amount) of 1850 call for $4.75.
The net outlay on this strategy is $14.00 with a max payout of $61 ($1850-$1750=75, -$14 cost=$61) should the market expire above $1,850 on 27th July. In real terms you risk $1,400 per 1 lot with a potential $6,100 payout. I like those odds!
Should you wan to add some protection....The danger is that the market fails and then there is a possibility that we revisit last weeks $1,675 area. Then a $1,675 put for same expiration date will set you back a paltry $4.00
What surprised me was how gold held so well during last weeks crazy Equity melt up post the Non Farm Payroll beat by a whopping 10.5m jobs. If ever there was a time that gold would have succumbed to heavy liquidation, that was it.
We are now once again back at the $1,750 mark and whilst I am bullish, the accumulated length in the market makes buying into strength particularly frightening.
The market has a habit of reaching a level where it gets sticky and finds itself having to put a lot of work in to break through. the recent price action reminds me of the $1,450 area back in August 2019 and again the $1,700 area back in march. Both times the market managed to clear out this levels ands rallied 7.8% and 5.2% respectively in the 2 weeks following.
One way to play the breakout is Via options. For August Expiry I would look to buy the $1,775 call for $18.75 and sell (equal amount) of 1850 call for $4.75.
The net outlay on this strategy is $14.00 with a max payout of $61 ($1850-$1750=75, -$14 cost=$61) should the market expire above $1,850 on 27th July. In real terms you risk $1,400 per 1 lot with a potential $6,100 payout. I like those odds!
Should you wan to add some protection....The danger is that the market fails and then there is a possibility that we revisit last weeks $1,675 area. Then a $1,675 put for same expiration date will set you back a paltry $4.00
Commento:
Please note the strikes are $1775/1850