Goldcorp Inc. (NYSE: GG) shares are rising today after gold futures rose to $1000 for the first time ever. Gold prices have received support from a weaker dollar, which has recently hit lows against multiple currencies. If you think that the company won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on GG.After hitting a one-year low of $21.00 in August, the stock hit a one-year high today. GG opened this morning at $43.94. So far today the stock has hit a low of $43.94 and a high of $44.95. As of 12:20, GG is trading at $44.63, up $1.63 (3.8%). The chart for GG looks bullish and steady.
For a bullish hedged play on this stock, I would consider a July bull-put credit spread below the $30 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. This particular trade will make an 8.7% return in just four months as long as GG is above $30 at July expiration. Goldcorp would have to fall by more than 32% before we would start to lose money.
GG hasn't been below $30 since September and has shown support around $35 recently. This trade could be risky if the price of gold drops, but even if that happens, this position could be protected by the support the stock might find at its 50- and 200-day moving averages, which are around $38 and $31 respectively.
Brent Archer is an options analyst and writer at Investors Observer. At publication time, Brent neither owns nor controls positions in GG.
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Reader Comments (Page 1 of 1)
3-14-2008 @ 9:08AM
R Allen said...
Hmmmm, Brent Archer... this Blogging Stock column looks suspiciously like the following Market Intelligence Report that was published earlier on the same day. In Journalism School, they teach you to credit your sources... otherwise, it looks a lot like plagiarism:
Goldcorp (GG) NewsBite - GG Soars as Gold Futures Hit $1000
Posted on Thursday, March 13, 2008 10:36 AM
Goldcorp (GG) opened at $44.14. So far today the stock has hit a low of $43.94 and a high of $44.37. GG is now trading at $44.59, up 1.59 (3.70%). After hitting a one-year low of $21.00 in August, the stock hit a one-year high of $44.87 in February. GG shares are trading higher after gold futures rose to $1000 for the first time ever. Gold prices have received support from a weaker dollar, which has recently hit lows against multiple currencies. Technical indicators for GG are bullish and steady. If you’re looking for a hedged play on this stock, consider a July bull-put credit spread below the $30 range. GG hasn’t been below $30 since September and has shown support around $35 recently. This trade could be risky if the price of gold drops, but even if that happens, this position could be protected by the support the stock might find at its 50- and 200-day moving averages, which are around $38 and $31 respectively. [LHF- Seven Summits Strategic Investments NewsBite] mm...
3-14-2008 @ 10:31AM
brent archer said...
R Allen -
In fact it is essentially the same story from the NewsBite.
The Market Intelligence Center is another site run by the company I work for and some of our content is used in more than one place.
I appreciate your concern,
Brent