Posts Tagged ‘optionchain’

A Gold Hedge

March 22nd, 2012

The DYY site contains some very valuable tools. One of these is the option plotting program. This was used by a member to create the following hedge and graphic plot:

optionchain

Here’s a hedge on the Jun 16, 2012 GLD options – I’m using the reported closing bid/ask prices to minimize over-optimism:

Buy 10 170 calls (~2.04)
Sell 20 176 calls (~1.06)
Buy 10 150 puts (~1.8)
Sell 20 145 puts (~1.02)

Buy 3 160 calls (~5.44)
Sell 6 166 calls (~2.99)
Buy 3 160 puts (~5.12)
Sell 6 155 puts (~2.95)

It looks like a lot of work, but it expires worth over $700 for GLD prices anywhere between 142 and 179 (currently 160), and could be worth as much as $6000 (at 176). And I bring cash in by placing the position.

I’ve attached a screen shot of the expiration value. Unfortunately the axis labels are too jammed together to read, but you get the idea.

Is it possible to place the order to assure it brings in at least $700?

Please place stop loss orders to liquidate the whole thing if GLD is > 174 or < 147 (I don't want to get too close to those precipices) or if the overall liquidation value falls below -$200.(Is it possible to place a stop loss order that requires a computation?)