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Email Post: Bulls, Bears And Gold

Can't do a show without an audience, and as the cable news sensation known as "Options Action" continues to grow, I wanted take a moment to answer an email regarding Friday's shows.

Deac in California writes:

Great show Friday. I've much enjoyed dipping my toe into options in such an informed manner.

Questions on the discussion about selling NEM April 40/45 Call Spread.

A. This gains most if NEM does NOT GO UP over 40 before expiration, stated as neutral to bearish on NEM. This makes sense.

B. But Joe said he's bullish on gold AND likes Mike's trade.

I'm confused. Assuming I'm correct on A, does Joe think that gold is longer term bullish but NEM is not likely to go up significantly before April?

Excellent question Deac.

As with most investments, timing is everything. Mike Khouw is short-term bearish to neutral on gold. As such, his strategy of selling the Newmont April 40/45 call spreadwas a bet that Newmont stock, which is closely correlated to gold, would stay below $40 by April expiration. JoeTerranova is also bearish in the short-term, but longer-term he is bullish bullion.

"The reflation trade will happen. We will see gold go higher long-term. In the near-term, however, we're seeing some consolidation and volatility come out of the market. That is bearish near-term for gold, and that makes me a fan of Mike's trade."

Deac, there's your answer.

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