The gold trade I did back in December 2013 and adding on a call option which I sold, received $30 in premiums and expiring January 30th, 2014.
Let’s recap some of the trade details; I bought gold at spot $1,232 on December 10th, 2013. Gold steadily moved upwards from then on and I decided to sell a call option at $1,246 expiring January 30th, 2014, hoping to give myself sufficient time to ensure that the option was exercised.
While I was busy with Christmas and the New Year’s, I stopped all trading except this outstanding gold trade. Having done the trade I was alittle nervous when gold decided to turn south towards the end of December reaching a low of $1,187 on December 20th. It meant that I was facing a mtm of about $45 loss per kg. Then, it started climbing up again, which was a welcome relief, however, I was beginning to think that I should have placed a stop loss level, as gold began dropping again, back down to $1,187 on December 30th.
However, since I had time and the fact that I know with a high level of confidence and comfort that whenever gold drops below $1,200, it will only be temporary and as long as I have time, I do not have to be unduly worried as the floor was established in June 2013 at $1,179.
Of course, I knew that gold was going to trade at a broader channel of between $1,200 and $1,300. I didn’t think that it would go higher than $1,300, given that most central banks around the world has stopped increasing liquidity and if anything at all may begin to taper following the footsteps of the U.S. So I knew the upside was somewhat capped.
Also, the fact that gold today is an asset class by itself, it would validate a fair price value of about $1,100.
From the new year onwards, gold just did a steady grinding path upwards.
On January 30th the high was during the NY session at $1,268 and the low was during the Asian session at $1,237 and since my option was expired at 10am NY time, I had the benefit of the uptick in gold prices.
The option was exercised against me, since the strike was at $1,246, so I delivered my gold at $1,246, after having bought it for $1,232 for a trading profit of $14 per kg. However, I also benefited from the $30 per kg premium for the call option that I sold, so my total profit was $46 per kg.
Pretty good trade if I may say so, of course, with some anxiety during the past month and a half.
The Panthenon Investment Group 