Published 9/19/2011
Gold prices have had a phenomenal run over the past year, but the distinguishing feature of the market in recent weeks has been extreme volatility – volatility that has many investors nervous about protecting the big profits they've rolled up and looking for ways to hedge gold.
Now, we don't advise jumping off the gold bull's back just yet – especially since Money Morning's leading gurus see a gold price climb to $5,000 possible over the long haul. But you may want to consider taking out a little short-term "insurance" on your precious metals profits.
In fact, we suggested readers do just that in the Aug. 22 issue ofMoney Morning Private Briefing. We even went a step further and issued step-by-step instructions for a gold-hedging strategy.
Just two days later, on Aug. 24, gold suffered its third-worst down day in history, plunging 5.6%.
Readers who took our advice reaped windfall profits as a result. And now we're giving you the same opportunity.
We're back today with another strategy to help "insure" your gold profits.
The Secret Way to Hedge Gold
The only thing you need to do to hedge gold is follow this simple options strategy.
As with most option strategies designed to lock in existing profits, this one begins with the purchase of an at-the-money CME gold put option – one for each gold futures contract you own (or one for each 100 ounces of gold you hold in other forms).
[Editor's Note: For those unfamiliar with options, a put option gives its owner the right to sell a specific underlying assetat a designated price for a limited period of time. For example, an October Freeport-McMoRan Copper & Gold Inc. (NYSE: FCX) put option with a strike price of 42 would give its holder the right to sell100 shares of FCX common stock at a price of $42 a share at any time between the date of purchase and the option's stated expiration date, in this case, Oct. 21, 2011. A call option, the other basic type of option, would give its holder the right to buy a given asset at a specified price for a limited period of time.]
Normally, that would be sufficient to protect your gains, but this time there's a catch. The huge jump in volatility – i.e., theChicago Board Option Exchange's (CBOE) Gold Volatility Index is trading near its all-time high – has resulted in sharply higher option premiums. .......
http://www.resourceinvestor.com/News/2011/9/Pages/How-to-Hedge-Gold.aspx
Now, we don't advise jumping off the gold bull's back just yet – especially since Money Morning's leading gurus see a gold price climb to $5,000 possible over the long haul. But you may want to consider taking out a little short-term "insurance" on your precious metals profits.
In fact, we suggested readers do just that in the Aug. 22 issue ofMoney Morning Private Briefing. We even went a step further and issued step-by-step instructions for a gold-hedging strategy.
Just two days later, on Aug. 24, gold suffered its third-worst down day in history, plunging 5.6%.
Readers who took our advice reaped windfall profits as a result. And now we're giving you the same opportunity.
We're back today with another strategy to help "insure" your gold profits.
The Secret Way to Hedge Gold
The only thing you need to do to hedge gold is follow this simple options strategy.
As with most option strategies designed to lock in existing profits, this one begins with the purchase of an at-the-money CME gold put option – one for each gold futures contract you own (or one for each 100 ounces of gold you hold in other forms).
[Editor's Note: For those unfamiliar with options, a put option gives its owner the right to sell a specific underlying assetat a designated price for a limited period of time. For example, an October Freeport-McMoRan Copper & Gold Inc. (NYSE: FCX) put option with a strike price of 42 would give its holder the right to sell100 shares of FCX common stock at a price of $42 a share at any time between the date of purchase and the option's stated expiration date, in this case, Oct. 21, 2011. A call option, the other basic type of option, would give its holder the right to buy a given asset at a specified price for a limited period of time.]
Normally, that would be sufficient to protect your gains, but this time there's a catch. The huge jump in volatility – i.e., theChicago Board Option Exchange's (CBOE) Gold Volatility Index is trading near its all-time high – has resulted in sharply higher option premiums. .......
http://www.resourceinvestor.com/News/2011/9/Pages/How-to-Hedge-Gold.aspx
No comments:
Post a Comment