Link to monitor this position
This strategy does not trade in and out of the market, it maintains positions with risk defined to the penny until the profit objectives are achieved or the contacts expire in 337 days (28 May 2024).
The objective of this trade is to capture the potential range in gold over the next 337 days, below is the risk reward for the exact trade for your account and potential impact on your balance, we’ll be trading a minimum of 1 unit to a maximum of 4. .
|Per unit risk/reward we’re trading a minuimum allocation 1 unit, maximum 4
|Working balance EET-90057||$83,457.86|
|Current cash balance
|Buy a $65,000 T-bill with a maturity of 28 May 2024 (yield 5.23%)
|Maximum trade duration
|Potential impact on account EET-90057
|If gold trades at $2,255 (+10.26%) once in the next 337 days +$23,920
|If gold trades at $1,655 (-19.32%) once in the next 337 days +$37,920
|If Gold trades at both at $1,655 and $2,255 in the next 337 days +$61,840.00
|Worst case liquidating value 28 May 2024 without interest income -$7,280.00
|Worst case liquidating value 28 May 2024 with interest income –$4,141.28
|Options educational videos|
|Market Comex Gold|
|Gold Option Quotes|
Where the CME CVOL measurement prices the high and low for gold during the next 12 months.
|High||$2,255||Max 12 month range, Jan 79 – Jan 80||270.21%|
|Percent change higher||+10.26%||Min 12 month range, Sep 94 – Sep 95||6.74%|
|Low||$1,650||Average 12 month range, 1980-2023||29.36%|
|Percent change lower||-19.32%||Highest High, August 2020||$2,070.48|
|Range||$605.00||Lowest Low, July 1999||$252.48|
|Percent range||29.95%||Average price 1980 – 2023||$752.70|
Following the Fed’s June meeting, the CME Group FedWatch tool tells us the probability of further interest rate hikes remains while the turmoil surrounding the banking sector has not disappeared, traders and investors have been torn, between higher rates that would pressure gold lower or parking funds in the oldest monetary safe haven gold pressuring the price higher.
- March 10: US regulators take over SVB
- March 15: Credit Suisse borrows over $53B from the Swiss National Bank
- March 17: SVB files for Ch 11 bankruptcy
- March 18: UBS agrees to purchase Credit Suisse
- May 3: FOMC meeting
- May 30: Rule Committee brings debt ceiling legislation to the floor
Using the CME Group CVOL measurement, in the chart above the convexity in gold options is at the upper end of the range. Convexity is a measure of the ratio of the volatility level of the out-of-the-money strikes to that of the at-the-money, meaning how expensive are the “extreme move” options.
Below positions for this trade and potential outcomes by 28 Mar 2023.
|Buy||5||2355||Calls||41||-$20,500||To hedge upside risk on the 2255 write|
|Write||10||2255||Calls||56.1||$56,100||Write, to generate time premium|
|Buy||5||2155||Calls||78.1||-$39,050||To capture the move from 2155 to 2255|
|Market||2020||Option Expiration 28 May (337 days)|
|Buy||5||1750||Puts||19.4||-$9,700||To capture the move from 1750 to 1650|
|Write||10||1650||Puts||10.1||$10,100||Write, to generate time premium|
|Buy||5||1550||Puts||5.1||-$2,550||To hedge downside on the 1650 write|
|Potential outcomes of this trade|
|Max risk net of all bid/ask spreads & fees||-$7,280||Gold stays flat for 337 days|
|Gold hits $2,255 once in 337 days||$23,920||+10.26% move to the upside|
|Gold hits $1,650 once in 337 days||$37,920||-19.32% move to the downside
|Gold hits $2,255 & $1650 once in 341 days||$61,840||Does not matter which occurs first|
|We use spread price orders on entry and
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