This post is an update of my Inflation play positions in Gold (GLD) as described in previous posts (https://itawealth.com/is-inflation-risk-likely-to-increase-a-low-cost-option-strategy-for-possible-participation/. https://itawealth.com/gld-option-position-update-15-may-2020/, https://itawealth.com/gld-options-inflation-play-08-july-2020-update/, https://itawealth.com/new-position-in-gld-as-a-longer-term-inflation-play/). This started by risking ~$3,500 to control 100 shares of GLD in the expectation of higher prices in GLD over the longer term and, through the re-investment of profits (without increasing risk) has now grown into an Options position that controls 300 shares of GLD.
I haven’t provided an update on these positions for some time since Gold prices have pulled back a little in the past month but, with my short Call Options expiring today (04 Sep), I have adjusted my positions by buying back the 04 Sep Calls (at the 195 and 190 strike prices) and selling Calls expiring 2 weeks later (on 18 Sep) at the $188 strike price.
I am separating the total GLD “position” into 2 separate trades based on the expiry date of the long Options that are held.
The first “trade” is holding 2 Contracts of the $170 strike Call expiring in March 2021. This “covers” the sale of 2 x $195 strike Calls that were scheduled to expire today (04 Sep). I have bought these 2 Calls back for $.02 and replaced them, through the sale of 2 x $188 strike Calls expiring 14 days from now, on 14 Sep, for a credit of 1.01 ($202):
This leaves this portion of my “position” with a profit/loss risk graph as shown in the right hand figure above. In tabular format this is summarized below:
that shows an unrealized profit of $2,756 with $504 maximum risk.
For those members following my Options Corner series of posts, note the high positive Delta (equivalent of 98 shares) and positive Theta ($11 per day of time decay). Vega is positive – that will work against us – but maximum loss due to volatility decay is only ~$70.
The second “trade” in this position holds 1 Contract of the $170 strike Calls (same strike as the first “trade”) but expiring 3 months later in June 2021. This trade had a $190 strike Call expiring today sold against it so I bought this back for $0.03 and sold a $188 strike Call expiring 2 weeks later for $1.03 (1.00 or $100 net credit);
This “trade” was opened on 06 August – that was bad timing since this was very close to the recent high. However, I am continuing to sell premium against the long Calls that are held and I still feel that prices will continue to rise over the longer term. As we can see from the above figure, this “trade” is presently showing a $628 loss with $2,483 maximum risk.
Performance of the total “position”, since I started to build the “position”, looks like this:
and is summarized as shown below:
i.e. we have ~$2,100 (unrealized) profit with $2,987 maximum risk.
Since the current short term Options expire in 14 days there will be an update to this post sometime in the next 2 weeks.
Update: 11 September 2020
With one week to go before expiry of the Sep 188 Calls the 2 trades look like this:
for the trade with long Calls expiring in March 2021:
and….. for the trade with long Calls expiring in June 2021:In Summary:
Update: 18 September 2020
As mentioned in the Comments section I have rolled my $188 strike Call Options that expired on Friday (18 Sep) to the $192 strike Calls expiring in October i.e. up (in price) and out (in time). This was filled for a net $102 credit on each Option ($306 total) and the 2 “trades” in this position now look like this:
For the Long Options expiring in March:
and …. for the Long Options expiring in June:
Net (unrealized) profit on the 2-trade “position” is $2,374 with $2,680 maximum risk.