Quote Originally Posted by davidallison@shaw.ca View Post
Billy,

Perhaps I should ask this in another thread, but I was wondering if you could share your thoughts on 'time to expiration' for buying options positions on primary robot trades?

Understanding the risks of trading options, at some point the GDX robot will turn to a short mode, where one would consider GDX puts. As you have pointed out the ETFs for GDX are not that great. When GDX robot signals a short, an opinion now, would give me time to contemplate your answer.
The seasonality for gold and gold stocks historically is end of July to year end. Last year was a great trade. I will be very interested to see if the GDX robot signals a short in the next couple of months, but everything for seasonality for the past several months seems to have been exactly two months early. That would imply the GDX robot is in for a long profitable trade. I was thinking of adding to my GDX position, but my experience tells me June and July can be wild months for gold.

Both GDX and IWM offer weekly option expiry, so lots of choice. TZA and TNA monthy. I know this is a personal preference, but given the fact that most of the option time premium evaporates in the three months, prior to expiration, and given your knowledge of the robots, would you be able to share any thoughts?

Your answer might also help in a possible pending IWM robot long position if June unfolds in a bullish way.

I consider you, Pascal, and this board the best I’ve come across in many years in the market. I don’t want to intrude, occupying your time answering too many obscure questions. Perhaps this question qualifies as obscure. Please let me know.

Dave
Hi Dave,


This is a very good question. I'll probably need more time, but there are several aspect of the signal that must be researched:

1. The signal strength is probably the most important key to invest using options. A very strong signal on GDX only occurs a few times each year...
2. Trade duration is probably also linked to the signal strength. I should research that aspect. Three months options should be long enough though, since a trade usually closes before that.

The main issue is with softer signals, which is what most signals are. Since these signals could easily backfire, an option trade will quickly move very negatively and hence should probably be avoided, except if you only invest only the total amount of the loss you are ready to take in the trade.

I do not believe that we will have successful short signals in the next few weeks, because the volatility on GDX is too low and most good short trades have been coming with much higher volatility... GDX is a very "emotional" ETF. We will however get weak short signals that will reverse within days.



Pascal