CHEAT SHEETS PREMIUM
Today, I'll identify a trading opportunity on the short side and walk you through the trade idea in detail. It involves either leverage-short ETF or selling option call spreads.
The Bloomberg Short Gold ETF GLL is intended to reflect the performance of gold as measured by the price of COMEX gold futures contracts. It is a "rolling index," which means that it does not take physical possession of any commodities but rolls futures contracts from one month to the next as each contract nears expiration. Currently, the ETF has a tailwind score of 95% , and the market forecast readings across multiple time-frames are quite strong. See below.
While inflation dominates the headlines, those pushing a short gold narrative believe the Fed is pushing rates in a mistaken deflationary policy of overaggressive hikes and that the dollar will resultantly continue to spiral upward (in gold terms). That makes a short Gold trade in dollar terms attractive. It’s important to understand both the risks and extra tax reporting requirements that comes with trading leveraged short instruments. These products are designed as tactical portfolio enhancements rather than long-term holds.
I cover inverse ETF’s in bear markets because I understand that many traders are uncomfortable with bi-directional trading. Watching instruments leveraged to produce gains if the price goes down doesn’t violate comfort zones, since price moves from lower left to upper right in winning scenarios. But Bear markets are also an opportunity to make money on the short side, and options can be a more efficient and less capital-intensive way of capitalizing on short opportunities.
Option selling strategies, in particular, offer traders tremendous upside because option premiums that sellers collect tend to be inflated as the level of fear about market declines rises. So, for those of us selling speculative option opportunities to option buyers, the premium we collect in exchange can be lucrative. It’s worth becoming educated about option selling for no other reason than to hedge a retirement account against market draw-down or to raise passive income on investments a trader might already be holding. I’ll demonstrate one risk-defined option-selling idea down below. However, for those subscribers completely unfamiliar with option concepts, this may be gibberish to you (and the GLL, as a result, a more straight-forward opportunity) This audio embed will guide you through my process.
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