Hey There Income Hunters,
I had a great time joining Option Pit Director of Education Andrew Giovinazzi for the live Volatility Edge event yesterday …
As we showed in our approach to trading the Digital Currency Arms Race, combining the macro view (that’s me!) with an efficient micro trade structure (that’s AG!) will optimize your potential for profit.
While I generally take the long view and focus on market direction, Andrew is equally adept at finding the right structure for limiting costs to carry trades.
Honestly, I have even become a more efficient trader while working alongside Andrew the past few months, and I can only imagine how much his regular students are benefiting.
So, the trade Andrew and I came up with is longer-term and offers an almost 7-1 risk-reward — while ALSO including a short-term vol put strategy that could pay for the longer trade …
That leaves traders with a free shot at a home run.
Macro View
The macro view I’m focused on is the transition to a new global monetary system that does not include the U.S. dollar as the preeminent currency.
I have no doubt gold will play a major role in this new setup for the following reasons …
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- Gold and silver are the only real money, as stated in our constitution. The dollar’s reign has once again proven the dangers of a fiat currency that’s not backed by a commodity and relies simply on faith in the government running it.
- Global central banks have printed trillions of dollars fighting the pandemic. By accumulating gold and linking it to a nation’s digital currency, central banks can build a solid monetary system that ignites global growth.
- Central banks can coordinate efforts to revalue the price of gold higher. This devalues paper currency and has the effect of reducing a nation’s debt. (FDR did this in 1933.)
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SPDR Gold Trust ETF Ticker: GLD
GLD is a deeply liquid exchange traded fund that tracks physical gold very closely. The ETF holds physical gold in a trust, making it a pure proxy for the real deal.
Check out the technical setup for GLD below …
This pattern is very bullish over an intermediate to long-term horizon.
It’s a classic breakout above a 200-day MA on high volume (green circle at bottom).
Ideally you want to also see a backtest, meaning a retest of the 200-day MA, which is in process …
When the market opened this yesterday, GLD touched right on the 200-day MA and was met by strong buying. That is an indication that long-term buyers were ready to accumulate at the key 200-day MA support level.
Physical Gold Weekly Chart with a Developing Head and Shoulders Pattern
The head-and-shoulders pattern above is a predictive chart formation that usually indicates a reversal in trend during which the market makes a shift from bullish to bearish, or vice-versa.
The pattern is complete when a left shoulder that forms an initial bottom then recovers before coming down to make a new low (the head) and then corrects higher and develops into a right shoulder.
The neckline is represented by the trend line connecting the two peaks of the shoulders.
A breakout occurs when the price pierces the neckline, with the target price equalling the highest price of the pattern ($1,960) and the lowest ($1,676) and adding the percent move to the $1960 move.
Once the neckline is broken, $2300 is the target for physical gold…
Go for GLD
Sith the macro view based on gold playing a major part in the new monetary system and the unwinding of the gold derivatives market happening in the weeks ahead, the GLD trade is ideal.
Now, I can’t give you the exact trade we put on yesterday here — it was exclusive to Volatility Edge members (hey, I warned you over the past few days!) — but you CAN still get five weeks of my Griff’s Picks in July.
Proshares Ultra VIX short-term Futures ETF (Ticker: UVXY)
Andrew and I also put on a short-term Vol trade designed to pay for the GLD trade.
Why?
UVXY compliments the GLD trade in two ways…
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- GLD benefits from a low interest rate environment with uncertain-to-decelerating growth. Owning puts on volatility benefits from a growing economy, thereby providing a natural hedge to the GLD trade.
- The second force that works to our advantage by adding the UVXY long put trade is the VIX term curve…
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The illustration below shows UVXY’s natural pull to the spot price. This works in our favor since, everything else being equal, puts gain in value as VIX futures roll to lower prices…
VIX CBOE Volatility Index
Now, again, our trade yesterday was exclusive to the event.
But don’t kick yourself!
Not only can you still get a five-pack of my picks in July (and I mentioned), but you can also snag the quarterly version of our premium volatility program, Volatility Edge, for one low price.
Then get ready to crush it with our macro/micro for the next 90 days!
Bring It Home
Speaking of macro/micro, in a volatile environment it makes a lot of sense to trade short-term vol when you have an edge to pay for your longer-term good risk/reward trades.
Drop comments and questions below, and as always …
Live and Trade With Passion My Friends,
Griff