GLD Analysis

SPDR Gold Trust (GLD)

Update 1/4/2017: GLD declined through the early portion of the holding period and then began a shallow retracement to the upside. Declining implied volatility helped the yield, and I exited at 60.1% of maximum potential profit.

Shares declined by 0.6% over 34 days, or a -7% annual rate. The options position produced a 150.5% yield on debit for a +1,616% annual rate.

The idea for this position came from trader Nick Batista at Dough. The structure produces a higher risk/reward ratio in return for wide wings on the iron condor and also has a lower implied volatility percentile than my guidelines allow.

The position, although hedged on both sides, has a long bias.

Like Nick, I shall use the JAN series of options, which trades for the last time 50 days hence, on Jan. 20.

Implied volatility stands at 19%, which stands in the 35th percentile of its annual range. The price used for analysis was $111.73.

Iron condor, short the $117 calls and long the $127 calls,
short the $110 puts and long the $100 puts,
sold for a credit and expiring Jan. 21.
Probability of expiring out-of-the-money

JAN Strike OTM Δ
Upper 117 78.1% 24
Lower 110 59.1% 38

The premium is $2.38, which is 24% of the width of the position’s wings.

The risk/reward ratio is 3.2:1.

Decision for My Account

I’ve entered a position on GLD as described above. The stock at the time of entry was priced at $111.75.

Tim Bovee, Portland, Oregon, Dec. 1, 2016

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