With equities catching a bid over the last few trading sessions, we've
unsurprisingly seen money flow out of the gold complex. Provided stocks continue
to bounce, the upside in gold mining stocks may be capped for the time being. A
look at the weekly chart of the Market Vectors Gold Miners (NYSE: GDX )
exchange-traded reveals a key resistance level looming closely overhead. In
anticipation of neutral to mildly bearish price action in this shiny ETF,
traders may consider selling September call spreads. The strike prices selected
will depend on the aggressiveness of the trader. I like the idea of selling
spreads just above the $64 resistance level, such as the September 65-70 call
spread. Entering the position consists of selling to open the 65 call while
buying to open the 70 call. Right now the spread can be sold for about a 60-cent
credit. The maximum reward is $60, and the maximum risk is $440. For a profit
target, traders should consider closing the spread if it can be bought back for
10 cents or less. If GDX successfully breaks the $64 resistance level, you may
want to close the position to minimize the loss. Source: MachTrader At the time
of this writing, Tyler Craig had no positions on GDX.
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