Here’s how I’m (still) trading $NUGT (August 30, 2019)
NUGT GDX NUGT
I’ve been covering, over the last few weeks, every so often just talking about how I’m trading NUGT ( NYSEARCA: NUGT ). This is the Direxion Gold Miners 3X ETF ( NYSEARCA: NUGT ), which mimics, x3, the movement of the Gold Miners Index, the GDX ( NYSEARCA: GDX ), the same chart here just different magnitude.
So to continue that this is what I did, I mentioned this to members yesterday, on Thursday, I was down a boatload of money on Thursday. It started on Wednesday when this gapped up a bit, gapped up a bit, which was great. It traded down a little bit; I was short some calls and also short some puts I believe. So this moved up here and the idea behind this trade, and it’s going to go on, shoot I don’t know, I may retire and keep doing it, it just depends. It’s going to go on as long as the broader uptrend continues.
When this is up here I’m not thinking about buying stock, I’m not thinking about selling stock, I’m thinking about what the options are doing. This was the high right here; I’m drawing this line here, and if the prior pattern is any indication, and it kind of is, then I’m expecting this kind of thing pretty soon, so I’m thinking about selling calls. I’m thinking about selling calls out of the money because my suspicion is that the stock is going to pull back. So my trade here was not selling stocks to take profits. My trade was selling out-of-the-money calls to put on a trade gearing up for this kind of thing. So this fell like 10 percent in one day, that’s a huge massive loss on my stock but I’m not thinking about the stock. I made good money on the calls that I sold at $2.40, I think they’re the ones that expire next Friday, but they’re very short duration calls at 2.40.
So then the stock does this, and then this morning when we see the stock down a little bit in the morning but not like it was yesterday, I didn’t really care so much that it was going to go above 40.00 I just wanted to see that it wasn’t going to fall below 39.00. That’s when I’m thinking, alright, do I buy back my calls that I sold for 2.40, I think they were at $0.49 at the time, do I buy those back or do I just let him expire worthless? And then when I see the stock starting to run up here I decide, well wait a minute, I’m going to go buy those calls back and I’ll sell some puts. So I did buy those calls back for like $0.60, so it cost me some profits in waiting a bit rather than just being decisive. In hindsight, I should have bought them back right away but I don’t know this is going to happen, I’m trading like a golfer, I’m not trying to hit 18, I’m just trying to get around the course under par.
So I bought those back, got a nice 75 percent profit out of the deal and turned around and sold some puts. So now I made a little bit back on my stock today, not a lot, and if I just look and see where the stock was up here versus down here, I have really kind of taken it in the shorts in the stock position, but I killed it on the calls here and I’m doing fine on the puts down here, I think they’re the 35s. And so over time, as I keep doing this trade I’m not thinking about the money that I’m making or losing in the stock. I’m thinking about trading the angles on this zigzag.
So this is what I’m looking at, as long as this trend is in place then over time I’ll make money on the trend of the stock. But I’m looking at selling at the peaks, not the stock but calls. Selling at the valleys, not the stock but the puts. So it’s sell, sell, sell, sell and then at the same time buy back what I sold, buy back what I sold, etcetera, etcetera. You can make a lot of money doing this strategy as long as the stock cooperates. And how do you know that the stocks cooperating? That’s up to you because you have got to understand how to read charts.
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