Jeff 6:44 am on Monday, April 11, 2016
Tags: ContangoETFs ( 446 )

NUGT calls

#ContangoETFs I was too early on these, as is too often the case. Need to pace myself!
STO NUGT Apr 15th 85 call for 2.05
STO NUGT Apr 29th 100 call for 2.90
STO NUGT May 6th 105 call for 3.20
STO NUGT May 13th 105 call for 3.50

jdietz1954 6:59 am on Monday, April 11, 2016

Jeff
This is an IRA so no naked calls only spreads. Currently holding short $NUGT April 29th 85/105 call spread giving me a maximum defined loss. I have a conditional order to buy stock on a break above my short April 29th 85 Call. If the stock order is filled I will wait for a bit to sell the long 105 leg to reduce basis. I’m undecided if this is a reasonable approach with three weeks to OpEx. Seems safe but I really am unsure on holding $NUGT at these lofty valuations. With $NUGT at the 3rd BB I would expect some sort of a pull back but what do I know. With the dollar weakening gold just might continue its climb. Comments welcome.
- Jeff 7:05 am on Monday, April 11, 2016
  
  It’s a tough call; the trick with these ETFs is you have to be able to endure some pain. Much tougher with spreads than naked. Your plan sounds okay, but then you’ll need to watch for the sharp pull back. So, if you buy the stock at 85 and sell the 105 when stock is at 87, what is your plan then if it pulls back to 80 or 75? I would be sure to define all scenarios before proceeding.
  - jdietz1954 8:48 am on Monday, April 11, 2016
    
    Jeff
    I abandoned all hope and cancelled the stock idea and closed the 85 short leg. In a day or 2 I’ll close the long side. I considered there too much down side risk being long the stock @ 85. Maybe top ticked the blasted thing this morning but I need to reconsider my approach to managing these items. BTC April 29th 85 Call @ 9.80. Had originally sold it at 1.95. Ouch. Time to go lick my wounds.
    - Option Iceman 8:58 am on Monday, April 11, 2016
      
      If you covered the short, get rid of the long too. That will offset some of the loss.
      If the stock pulls back now your loss will grow even worse.
      Look at it this way, if you were sitting in cash, would you be willing to buy the option you are currently long?
      - jdietz1954 9:10 am on Monday, April 11, 2016
        
        Taylor So true. Sold it. Now out all together. Time to reevaluate my approach. Overall loss 4.35. Thanks guys for the feedback.
    - Jeff 9:07 am on Monday, April 11, 2016
      
      I agree with Iceman here… I rarely try the legging out thing. It may very well work if it continues higher this week, but it’s a chance I don’t like taking, especially with the 3rd Dev B-band being tested today.