Are Gold Futures Options Profitable?



http://www.options-trading-education.com/24088/are-gold-futures-options-profitable/ Are Gold Futures Options Profitable? By www.Options-Trading-Education.com It has been a while since we wrote about trading gold options. The question of whether gold futures options are profitable comes to mind as the stock market continues to climb and gold has fallen into the $1,200 range. When the market is going up gold tends to suffer and when the market takes a hit gold goes up. And, markets do not go up forever. So, gold may not remain in the doldrums forever either. In our Trading Gold Options article we recalled the predictions of the futurist Alvin Toffler and his book Future Shock. Toffler’s premise was that society is not only to change going forward but that the rate of change will progressively increase. Our premise is that this rate of change concept regarding society applies to stocks, commodities and options as well. We noted that for the options trader with sufficient capital today’s potentially volatile market provides virtually unlimited opportunity. The key to profitable gold trading is often the options market. So, are gold futures options profitable today? Chaos and the Price of Gold There are a lot of things in today’s world that could go really bad. The civil war in Ukraine, the Boko Haram terrorists in Nigeria, Islamic State militants in Iraq and Syria and the lingering issue of Iran developing nuclear weapons could all or singularly get a lot worse. The Ebola epidemic in West Africa will get a lot worse before it gets better. And, if the virus mutates it could become a global issue. Any of these things going from bad to worse could drive up the price gold. But do you really want to go out and buy gold bullion today? What if things get better and the US economy continues to improve? This is what happened in the early 1980s when gold peaked at $800 an ounce and then fell to $200 for nearly twenty years! Gold futures options could be profitable because in buying calls on gold futures one has a limited risk equal to the price of the options contract and a potentially unlimited upside potential. The point is to buy calls to lock in opportunity in case gold goes up again. Are Gold Futures Options Profitable? The premium of a gold future call option goes down as the strike price goes up. For a strike price substantially higher than the current market price a trader could potentially get a call option on gold futures for a few dollars a troy ounce. If things were to go badly in West Africa, Ukraine and Iraq all at once gold could find itself back in at the $1,900 range where it was a couple of years ago. A call contract for 100 ounces of gold bullion at$1,250 would then be worth $650 x 100 = $65,000 on an investment of a few hundred dollars. Are gold futures options profitable? They are when the trader anticipates a big hike in the price of gold! There are many profitable options strategies with gold which could also be applied to gold mining stocks and gold ETFs as well as gold bullion futures. As always sit out a trade if you do not understand it and always do your own home work and do not rely on tips. http://youtu.be/_RpLqG79TCU

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