Sunday, October 31, 2010

GDXJ Now Offers Long-Term LEAP Options

As if recent price action in the Gold price wasn't enough, there is now a tantalizing play on the Gold miners available for speculators in the junior Gold patch. Long term options (LEAPS) on the GDXJ ETF that expire in January of 2012 and January of 2013 are now available.

I remain a patient watcher of the Gold market and am still largely on the sidelines when it comes to Gold miners. On the next decent spike down in Gold stocks, however, I will be loading the boat with 2013 LEAP option calls on GDXJ. What's holding me back right now is the chart of the ratio of Gold to Gold stocks (using $HUI:$GOLD as a proxy) and what I believe is a short-term bottom forming in the U.S. Dollar. Here's a 10.5 year chart of the $HUI:$GOLD ratio thru Friday's close:

I think we are in correction mode in the Gold patch, just what's needed to cool the sector off a little. I think the next thrust up is going to be big in the Gold patch and I think Gold stocks are going to outperform. I am hoping a good opportunity to buy Gold stocks and more physical Gold presents itself before the year is over. I remain bearish on general stocks/the stock market, but am eagerly anticipating putting every penny of my speculative trading money into 2013 expiration bullish call options on GDXJ. I will be sure to post when I start buying.

Due to some new interests that will keep me busy for a while, posting will remain sporadic. I remain a rabid Gold bull for the long term. The Dow to Gold ratio will reach 2 (and may well go below 1) before the current secular Gold bull market is over.

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