Here's How To Profit From This Bullish Setup In GLD Using Options | IBD

TL;DR

Trade analysis recommends a bull put spread in the gold ETF GLD due to recent market conditions and potential for a bounce.

Transcript

foreign it's Allie Corman Harold Morris here with your option of the day for Thursday April 27th and today we're going to be taking a look at a bull put spread in the gold ETF GLD so it's good to see you Harold let's first go to market Smith and talk through the thesis behind this trade all right so gold you know it's had a nice move recently gold ... Read More

Key Insights

• 🙈 Gold has seen recent market movement and is attracting attention due to economic uncertainty.
• 🥡 The trade recommendation takes advantage of the potential for a bounce in gold prices through a bull put spread.
• 😥 The break-even point and probability of success are important factors to consider when assessing the trade.
• 🧘 The trade analysis provides guidance on position sizing based on portfolio risk.

Questions & Answers

Q: Why is gold in the news and how does it relate to the trade recommendation?

Gold is in the news due to uncertainty in the economy, which often leads to increased interest in gold as a safe-haven asset. The trade recommendation takes advantage of this potential by entering a bull put spread on the gold ETF, GLD.

Q: What factors play into determining the break-even point for this trade?

The break-even point is slightly below the pivot point, which is determined by hovering the mouse over a pattern on the chart. The pivot point is important to consider as it influences the break-even level for the trade.

Q: Why is protection needed in this trade, and how is it achieved?

Protection is added to the trade by buying the 175 strike put. This ensures that losses are limited if the price of GLD falls below the break-even point. It provides insurance against potential downside risk.

Q: How is the probability of success calculated for this trade?

The probability of success is calculated by taking the width of the spread (5 dollars) minus the credit received ($1.14) and dividing it by the width of the spread, then multiplying by 100. In this case, the probability of success is calculated to be 77.2%.

Summary & Key Takeaways

• Gold has experienced a recent upward movement and is in the news due to economic uncertainty.

• The trade involves selling the 180 strike put and buying the 175 strike put for protection.

• The trade offers a credit of $1.14 and has a break-even point slightly below the pivot point at 181.