The Plan Ahead: GLD Levels/Strategic Acquisition Via Short Put for AMEX:GLD by NaughtyPines

Generally speaking, I’m a premium seller, taking advantage of high implied volatility to sell options to take a position in an underlying without actually getting into shares of stock. GLD , however, isn’t particularly known for its volatility and therefore isn’t the greatest standalone premium selling play. As of the writing of this post, 30-day implied is at 15.6%, which isn’t exactly something to write home about. Consequently, while I am selling premium in GLD , I consider what I’m doing as more in the nature of a directional shot on weakness as a opposed to a pure “tons of room to be wrong” premium selling play and because of this, actually look at a GLD chart from time to time to consider whether given weakness is weakness I’m looking for and whether selling a put at a given strike “lines up” with given price action and is in an area in which I’d be comfortable with acquiring shares.

Pictured here is my full GLD ladder, with puts sold or rolled at various points in time. As is apparent from price action, I may have gotten a bit too aggressive with the 163, but was a little more thoughtful with the other rungs where I sold on weakness back to ~155, which is apparent support/resistance running back to June of 2020 and even got some longer dated contracts on where the 20 delta was coincident with lower support resistance in the vicinity of 147.

So, in a nutshell, here’s the plan ahead:

a) Obviously, I’m going to have to manage the 163’s. I don’t like the level particularly as an acquisitional price point, since it’s now apparent that the market will give me opportunities for cheaper, if not at 155, then even farther below at 147. Consequently, I’ll look to roll the 163’s down a smidge and out in time in the event that price doesn’t stick above that level running into the May 21st expiry. Although my mindset is to generally talk myself into being “fine” with acquiring shares at the price point any given short point represents, I regularly revisit whether I have changed my mind given what has occurred since I got filled, and here, well, I’d rather be in shares at a lower price. As a result, I’m going to stay in the options for the time being, which I can kind of massage and manipulate via roll — something I can’t do if I get into stock, where my cost basis reduction technique is limited to selling call against.

b) On weakness back to 155, sell puts. Where? Well, I generally like room to be wrong, so it’s likely to be ~20 delta, 45 days until expiry or greater. Those puts will be clear of the 155 and — ideally, clear of that lower support/resistance at ~147, but we’ll have to see when and if we get there where a 20 delta strike in the next expiry or expiries 45 days or greater line up.

For those without the buying power to go full on naked, consider spreading with the short put leg at the 20. For example, the June 18th 154/159 short put vertical with the short leg at the 20 delta was paying .57 ($57) as of Friday close on buying power of 4.42, a 13.1% ROC at max. Not that I’m going to do that here (again, waiting for 155), but pricing out the spread gives me an idea as to where I’ll have to set up my tent in the event I want to get at least 10% out of the spread, and that’s with at least a ~20 delta short leg.

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