Trade Alert: GDX
Buy to open VanEck Vectors Gold Miners ETF (NYSE: GDX) March 16, 2018 $22.50 call option.
The gold-stock indicator is becoming more bullish, and warrants taking a short-term leveraged position on gold stocks via GDX. More detail about the indicators to come in a Weekly Update.
Stock Talk
Gompps
GDX 03/16/2018 22.50 C BTO @ 0.76 at Schwab
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Ajax
Greetings!
I am a new member as of today. I have two questions about this GDX alert:
1) the alert indicated the March 16, 2018 $22.50 call, but the update letter “Jumping on a Move in Our Gold-Stock Indicator” mentions a strike of $25.50. Which is correct?
2) Regardless of the answer to #1, is this trade still viable 7 days later? I can see from the post by Grompps below that the purchase price a few days ago is about half what it is today for the $22.50 strike.
Thank you.
P.S. I enjoyed the introductory video.
Scott Chan
Dear Ajax,
Welcome aboard!
The strike price is $22.50. The update must have contained a typo. Sorry for causing the confusion. In the future, when in doubt, please check the Portfolio section of the website for which option is recommended.
I spoke to Steve a few minutes ago. His gold-stock indicator still flashes a “buy” signal. However, he also noted there’s a chance he will decide to take the profit on the trade even with the bullish signal.
So if going strictly by the indicator signal, GDX is still a buy, but we could exit to take gains. I will have to leave it at your discretion whether you want to buy in.
Ajax
Understood. Thank you for clarifying good sir.
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Derek: Las Vegas, NV
FYI, for those in the GDX trade. Tonight on Mad Money, Cramer noted he is bullish on gold and says it looks ripe to run. Great news for us, reassurance is always good…
Derek
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Jeffrey Forman
Now that our GDX option is IN the money….doesn’t it’s future appreciation as GDX continues to increase (we hope) slow versus an option strike price that is higher than the current $22.50 strike price?
If so, is buying an option with a higher strike price better than holding on to our current option?
Scott Chan
Dear Jeffrey,
Yes, an out-of-the money option usually offers higher leverage than an already in-the-money option. However, we have to consider the trading costs of selling the $22.50 call and buying a new one. Depending on how many contracts you are trading, the commission cost could be negligible in percentage terms, but it’s still something to consider.
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