Options Trading — Adam’s Options — iBankCoin

So if you can’t say something nice, don’t say it, right?

So what to say then of these commodities?

Well, commodity stocks are starting to outperform the underlying. Popped up GDX vs. GLD and SLV, and IYE vs. USO here, and all are in “X”s. GDX veritably bullish vs. SLV.

So if the stocks are “leading” a bit, maybe getting close to a turn?

As the options go, don’t actually have any in SLV. GLD does, but not a whole lot of history. Volatility is about 30, which is pretty much *record* high. But again, only 3 month’s of trading to look at. The best guideline is historical volatility, and that has ranged from a low of 12 last September to a high of 29ish in both November and March.

So if we had a GLD VIX, it would look a bit like our actual VIX did when it hit the mid 30’s a couple times this year. That is, a bit extreme.

That’s the bullish *news*. The flip side is that much like in everything else that implodes, the world seems determined not to miss THE buying opportunity. As per Nick at Schaeffer’s, lots of options interest in call options on gold shares.

Using the Gold Bugs Index (HUI) as a metric, Nick has this.

Two things stand out to me. The first is the break of support near 400. The second is the oversold reading shown on the Relative Strength Index (RSI).

Pulling this all-together, it seems we have the following situation…Gold stocks break support and are then hit with aggressive selling pressure which pushes them into oversold territory. Traders then jump on the group and start trying to call a bottom.

This entry was posted on Monday, August 18th, 2008 at 8:51 am and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.