Bought to open NUGT covered call with 7/22 expiration, $136.00 strike

action

Bought to open 200 shares of NUGT for $136.31 and sold to open 2 call contracts with strike $136.00 expiring 7/22 for $4.40. Total cost after commission was $26,399.48, or $132.00/share.

rationale

Following the big drop in gold prices yesterday, stocks of gold miners rebounded today. I think the potential for further strength in gold is limited, given the overall solid earnings season we are seeing so far. On the other hand, for gold to drop significantly, we would likely need more strength in the US Dollar. Without Fed tightening (which I believe is unlikely) I see little scope for further dollar gains.

Consequently, this is a bet that gold miners will be relatively range-bound. The IV in NUGT is simply too high to pass up, here. Effectively, I am getting more than 3% of downside protection on the long position, for less than 2 days of exposure.

July 21, 2016 at 6:41pm · NUGT · buy to open · options · covered call


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