Making Gold
The equity market moves since Nov 8th have been
nothing short of spectacular.
Essentially what many thought would happen did not, and the run into
2017 became a new ballgame. Financials
and commodities jumped, tech made a slight move and interest rate products
tanked. Not least of which was the
inflation hedge gold.
On a pure snap of volatility using AlphaVision, NUGT stands out as the most volatile
name for its market cap. 3x levered products almost always lead for realized vol,
so it is just a matter of which one.
NUGT has some of the largest 60 day vol (red) and 10 day vol (building
height). Which makes sense considering
the free fall in gold and that makes it the vol leader of a volatile group.
That also brings me to the fun of the landscape. Outlying
names only stay there for so long and gold is trading like inflation is
dead. Short term gold is ugly but longer
term should rise. Use the realized
volatility for a short term short direction play, say a put time spread below
the money in the Dec/Jan cycle for GLD and buy some longer term calls in NUGT
for a pop. If the realized vol holds the
put time spreads should pay and maybe pay for all the NUGT calls. Then ride the NUGT calls.
Read more from Andrew at Option Pit