Feel The Rhythm

Gold is really starting to awaken here and I am selling into strength this morning - unloading half of my options position. I had a desire to hold on longer, but I realized that it is in my interests to become more disciplined in trade management. So this morning I sold 5 of my 10 Newmont calls for a 100% profit. That resulted in recovering my entire cost in the position including commissions. So basically, any further increase in the options from here is pure profit. If the calls falter - I can only lose the gains that I had obtained.

There is one problem with the above analysis and it is a worry that I have become increasingly conscious of with this year's success. It is also an important point from the trading perspective. Basically, at some point - your portfolio consists largely of former profits. It is not healthy for you to think of - oh - I am still above my cost - because you are constantly trying to increase your pot.

Any type of hit that your portfolio takes - 10-15% as a whole - results in volatility to your returns and is a significant drawdown of your available capital. The best traders seek to limit drawdown at a maximum of 8% of capital.

Here are a couple charts and numbers of the first part of the liquidated trade. Options expire next friday and I will let the rest of my position run. Let's hope for another double next week . ;)

Newmont - Daily P&L:


Newmont - 1/2 Position Close:


Newmont - Entry and Exit Chart:



Today is shaping up to be another great one. Let's keep our fingers crossed.

-BG