Opened NUGT covered put (7/8 expiration, $167.50 strike)

action

Sold to open 100 shares of NUGT at $167.05, and sold to open 1 put contract with $167.50 strike price, expiring 7/8, at $8.90. Total proceeds after commission are $17,611.65, or $176.12/share.

rationale

NUGT has had a tremendous rally, recently. The ETF is up 30% in the last 8 trading days, it has been up 5 consecutive days, and it spent the entire last 3 trading days above its Bollinger Bands. The volatility is also sky-high: The at-the market puts with 2 days to expiration cost more than 5% of the ETF. Using the full history of NUGT, the probability of this position losing money is just under 26%; the likelihood of it achieving maximum profit is almost 48%.

NUGT daily chart, from tradingview.comNUGT daily chart, from tradingview.com

I also note that during the last three days’ parabolic rise, the trading volume of NUGT was surprisingly low. To me, it looks like the odds of a fairly substantial (if brief) correction are very high.

July 6, 2016 at 6:48pm · NUGT · buy to open · covered put · options


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