Wednesday, November 26, 2014

Aqumin Volatility Newsletter 11/26/2014 $EGO $GDX $GDXJ

Gold might glitter again

Stocks are still managing to stay near their all-time highs as we wait for OPEC to deliberate on production cuts. So far there is not much in the way of news on that except for some snippets from oil ministers that they are not cutting. The price of oil remains in flux to put it mildly. Another commodity making some moves lately is gold.

With the raft of easing going on between Japan and the ECB, it is a wonder that gold does not take off. What gold has done for most of the year is fall apart. Most of the gold miner indexes are near the lows. When you view that in the OptionVision™ realized volatility landscape, the miners are actually starting to bounce. On average the Metals and Mining group has the best average 1 week total return (bottom left hand sector).

11-26-2014 12-49-51 PM

Also note that the realized volatility is declining for most of the sector, keeping with the overall pattern of realized volatility decline in the market. I selected EGO as sample miner with rising prices and declining realized volatility. This is what you want to see for a group on the mend after getting smoked for most of the year.

With easing likely to continue, gold miners are making their way out. A good way to play this would be selling OTM puts in the GDX or GDXJ. As long as you can stomach the ETF’s down here this is not a bad way to play the record equity prices.

OptionVision™ – data from ORATS

Read more from Andrew at Option Pit

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