Options Jive

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The Goods on Gold Stocks

Options Jive

Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.

Gold stocks have high IV, overstated option prices and a weak correlation with SPY, which implies shorting selling opportunities without much influence on stock positions.

According to our study, the historical correlation between SPY and gold stocks like GDX is generally near zero, which is significantly less than the correlation between GLD and GDX. This means that gold stocks like GDX affect stock positions less.

Our study on 1 Standard Deviation Strangles on gold stocks including GLD, GDX and GDXJ shows that they have a higher success rate than expected, which implies an overstatement in option prices, and according to our study, this overstatement is enhanced if we enter the trades when IV rank is above 50%.

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