Earlier in August, amidst an uptick in volatility we checked in on gold and the gold miners, with the thought that some renewed vol in other asset classes was likely to mean those caught a bid. Here was the trade at the time, from August 10th:
GDX (23) Buy the Oct 24/28 – 21 call spread risk reversal for .30
- Sell to open 1 Oct 21 put at .35
- Buy to open 1 Oct 24 call for .75
- Sell to open 1 Oct 28 call at .10
Since then we haven’t really gotten any significant market corrections but nonetheless, the GDX have broken out above their recent downtrend. With GDX now $25.18 this trade is worth about 1.50 vs the original .30. Of course, the original trade risked more than .30 because it involved a short put. And now with the etf higher, that risk can be taken off entirely by closing the Oct 21 put, and then some profits can be booked on an adjustment on the call spread.
Update:
-Buy to close the Oct 21 put for .05 (for a .30 profit)
-Sell to close the Oct 24 call at 1.70 (for a .95 profit)
-Buy to Open the Oct 25 call for 1.10
New Position: Long the GDX Oct 25/28 call spread for a .10 credit (currently worth .90 cents)
Rationale – This takes off all risk and books 55 cents of the profits. The rest of the profits are still at risk but the 25/28 call spread can be worth up to 3.00 so it stays in the game for more upside. For those happy with the current profits the entire trade can be closed.