Gold Mining Stock Picks

The October 1st issue of Barron’s had an article focusing on gold mining companies. I’ve only traded a gold stock once before.  It was Ivanhoe (IVN).  I think I made a few dollars as it bounced past $4.  A friend of mine recommended it as he had already made a killing in precious metal stocks and thought gold had legs.  He was a mentor of mine for investing and after moved away from Atlanta we didn’t stay in touch as often.  I’m not sure if he got out of IVN completely.  I wish I hadn’t.  Barron’s mentioned IVN in its article and I saw that it traded over $16 briefly and is still over $12 now.  I could’ve made a killing, but can’t imagine I wouldn’t have sold earlier on a pull back.  Aparently IVN has no earnings yet, but seems to have a bright future with Rio Tinto (RTP) being one of their major investors which could reduce the downside risk.

Anyway, the other stock picks for gold mining companies were NEM, GFI, GOLD and ABX.  Jim Cramer highlighted ABX as his favorite in last night’s Mad Money episode.  I have copper mining exposure with PCU, but agree with the gold theory that the price will most likely continue to rise and create huge profits for these companies.

I charted all five of these and saw they’ve all fallen from of their recent highs over the past few days.  Volatility is up on most of the options due to the uncertain future of gold.  ABX November 37.50 puts seemed reasonable and GOLD November 30 puts seem a little better.  The main reason I like GOLD more is that the stike isn’t as far OTM and I’m not ready to start selling higher, ITM puts right now.

While Randgold Resources Ltd (GOLD) was trading at 30.71, I sold three November 30 naked puts (GUDWF) and received $467.75 after commissions.  I see 30 as a level of support for GOLD and think selling these puts out-of-the-money helps give me that little extra cushion I like.

If you are not reading this post on www.mytradersjournal.com you are reading it from a site that has plagiarized it.  I’ve had to add this notice to the end of every post with the growing number of scum out there who steal posts and don’t credit the authors.