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Options on Gold: An Overview


adamsmiths

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Although there are many instruments that a trader can trade, gold attracts many traders due to the safety and opportunities it offers. There are many ways to invest your money in gold and one of them is gold options. A gold option is similar to regular option. Gold bullions are bought and sold at a specified price on a predetermined future date. The quantity, date of delivery and strike price are all decided beforehand. And just like any other option, it is an option not an obligation.

 

Many traders prefer putting options on gold rather than trading gold futures or buying physical gold. This is because gold options require less capital investment and involve lower risk. The gold option is perfect for those who are looking for a short-term and less capital intensive way of fetching decent profit.

 

Calls and Puts

Options help a trader to benefit from the rise and fall in the gold prices. Gold call option must be purchased when the prices are expected to rise. Strike price is the price at which gold is bought. If the price of gold rises above the strike price before the expiry date of the option arrives, the trader makes profit. In case the gold price remains lower than the strike price before the option expires, the trader loses what he/she has paid for the option.

 

Put option, on the other hand, gives the right to sell gold at a predetermined strike price within a certain period amount of time. A trader earns profit, if the gold price falls below the strike price. If the prices rise above the strike price, the amount a trader invested will be lost. It is not necessary for a trader to hold a trade till expiry. Options can be sold at anytime you want. This allows you to minimise the loss. Traders must remember both the call and put options are like rights, not obligations.

 

Strategies to Trade Gold Options

Although gold options are safe havens, experts suggest that traders who are thinking about venturing into gold options trading must know certain trading strategies. Here are certain strategies that will help both new and experienced traders alike.

 

Iron condor

This is a strategy that is considered to be the most suitable strategy for beginners. This is considered a safe way to sell options. This is because a trader does not lose out on either side of the option. In this strategy, a trader picks a trading range. The sell out is made around the range when the option expires out of money.

 

Bull and Bear Spread

Bull call spread and bear put spread are the trading strategies that are also known as vertical spreads. This is because they occur within the same expiry period but have different strike rates. Both the strategies quantify easily.

 

Covered Call

Covered call or buy-write option is one of the most commonly used strategies. If the trader has a neutral or bullish opinion, he/she can use this strategy. This strategy helps to maximise profits and minimise losses.

 

This is the preliminary information about the gold options that a trader should know. Gold options are suitable for traders who wish to maximise their exposure with minimum risk.

Edited by Neo
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  • 1 year later...

The trading instruments are attractive for the traders and getting more money from that. The gold is famous tools for women to wear in functions and etc. The options based trade is possible at present in market. The trader should be get the amount from their auction basis. The trading information to be shared with online. The strike price is to be fixed by rate in market. The expiry date and rate will be monitor for the traders at online. The certain period the amount will be allocated for the particular person. Thanks for posting your thread here. Content is nice and great solution is possible in

 

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Edited by jdurand
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  • 2 years later...
2 hours ago, cowpoke said:

Imagine a giant PM filled meteor.  The next civilization would be wealthy.  Exquisite Karma. 

 

Actually, if anyone suddenly acquired a large quantity of a PM that metal would become close to worthless.  Supply and demand.

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25 minutes ago, jdurand said:

 

Actually, if anyone suddenly acquired a large quantity of a PM that metal would become close to worthless.  Supply and demand.

 

Yeah, but they could hammer some really nice bed pans out of the stuff.

 

Actually, I wasn't thinking at all about wealth, as in money.  I was thinking about the usefulness of various PMs, in many different ways, not monetary value.  The original value of gold, silver, and PGMs, had to do with their unique physical properties and usefulness of same.  Having more of this raw material available could well result in a greater overall "wealth" to a later civilization.  

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To be valuable in trade, an item has to be scarce compared to demand and hard to duplicate.  So, air isn't a good commodity as it's easy for anyone to get.  However, a tank of liquid air is valuable as it's difficult to get into that form.

 

Hydrogen in and of itself is everywhere, but costs considerable effort + resources to get in the pure form so a tank of hydrogen gas isn't cheap.  Liquid hydrogen is even more expensive.

 

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14 minutes ago, jdurand said:

To be valuable in trade, an item has to be scarce compared to demand and hard to duplicate.  So, air isn't a good commodity as it's easy for anyone to get.  However, a tank of liquid air is valuable as it's difficult to get into that form.

 

Hydrogen in and of itself is everywhere, but costs considerable effort + resources to get in the pure form so a tank of hydrogen gas isn't cheap.  Liquid hydrogen is even more expensive.

 

 

I wasn't talking trade items, either; just plain old availability of raw materials; things you could pick up off the ground and use before trading or purchasing stuff was a thing.  Before money, living close to obsidian made you "wealthier" because it was the easiest of materials to make killer blades out of; not because you could trade it, but because you could use it to make your life easier.  Free native metals are similarly empowering. 

 

Maybe we are working on different definitions of the term "wealth".

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lol cowpoke...I am probably displaying past lives as in today's world

 I love scrounging....Saturday person commented on a rather large size

lattice piece I have that some of it is broken...however in my view,

much of it is fine...and usable...and means I don't have to 'spend'

 

lol those who talk climate change and environmental jog-en (sp?)

and replace everything for perfection..my,my..

Edited by easy
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