David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream. More than 30 investing pros with skin in the game give you actionable insight and investment ideas. Replacing shares that have appreciated substantially with call options is one of the most conservative and time-tested ways of locking in gains and reducing the risk in a position.
I would not have recommended this tactic a few months ago since the implied volatility of gold options was far above average levels, making stock replacement a more expensive route to take. Please click on the link within the confirmation email previously sent you to complete registration. Options markets, however, have not reacted strongly to recent troubles, as both one- and two-month implied volatility estimates are within the bottom third of their two-year ranges. The subsequent decline to $1600 at the end of 2011 raised the worry that the steady trend higher, begun in late 2008, might be over. However, as the attached chart shows, option implied volatility at a 180-day time to expiration has declined from 30% and higher back into the low 20s, which is near its long-term average.
These moderately low volatility readings suggest that traders do not anticipate that price swings in the shares will be more dramatic than they have tended to be in the past.
Investors who are feeling under pressure or uncertain about their gold exposure can use options to improve their situation and carve out a smoother return profile.
It is a political talisman for the doomsayers whose hyperinflation scenarios are always just barely distant enough and vague enough to avoid empirical falsification.
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