tastylive logo
uploaded image

As gold prices surge to records, two high-volatility opportunities emerge

By:Michael "Dr. Data" Rechenthin

A Newmont mining strangle and a Costco skewed iron condor play.

The VanEck Gold Miners ETF (GDX) holds 58 stocks and primarily focuses on large-cap gold mining companies, while the VanEck Junior Gold Miners ETF (GDXJ) contains 82 stocks, targeting smaller, junior gold mining firms.


The top 4 stocks in GDX account for 39% of the ETF's total weight. These top holdings are:

Newmont (NEM)

Agnico Eagle (AEM)

Barrick Gold (GOLD)


Wheaton Precious Metals (WPM)


On the other hand, the top 4 stocks in GDXJ make up 28% of the ETF's total weight — so a bit more diversification. These holdings are:


Alamos Gold (AGI)

Harmony Gold Mining (HMY)

Pan American Silver (PAAS)

Evolution Mining (EVN)



VanEck Gold Miners ETF (GDX)



The Junior Miners (GDXJ) has considerably higher volatility, yet it has not historically moved much more than the GDX. For this reason, we lean toward the options in GDXJ.


Junior Miners (GDXJ)




Gold Silver Ratio

Let's say you think the metals will go up. Should you buy gold or silver?


A Look at the Gold/Silver Ratio

This ratio measures the value of one ounce of gold relative to the value of one ounce of silver. Gold and Silver traders use this ratio to trade the products.


So here is the math:

Gold = $2926/ounce

Silver = $32.62/ounce


Therefore, 2926/32.62 = 89.69 ounces of silver, which is equal to the price of one ounce of gold.


cherrypicks3 feb 18.png


If you think the ratio will continue to go up, then gold is cheap relative to silver. But if you think that the ratio will go down, then silver is cheap relative to gold.


This is one more tool that you can use to help to evaluate your trades.


ETFs and Futures

Below we show the size of the gold and silver futures.


Gold futures (/GC) is worth just under $300,000 worth of gold. There is a lot of leverage, but it also is a large product. Keep that in mind when trading it.



cherrypicks4 feb 18.png


Two Trade Ideas

NEM ($46.89) Short Strangle (MAR) $2.58 Credit

Newmont is one of the biggest gold/metals miners in the world, and it has seen a bid alongside the upside in spot gold. With an IVR of 100, the current implied volatility is about as high as it's been during the last year. If you think the metals and miners might cool off a bit, or at least stay rangebound, the 45/50 strangle in March trades at $2.58 credit and only uses around $700 in buying power.


Newmont




COST ($1057) Skewed Iron Condor (MAR) $5.65 Credit

Costco is selling 100-200 million dollars worth of gold bars month over month! The stock is up almost 15% this year alone. If you think it might cool off a bit at the highs, a skewed iron condor is a way to play for some sideways/down movement. Selling a $10 wide 1000/990 put spread and a $20 wide 1120/1140 call spread provides some short delta with some short volatility.


Costco




Subscribe to Cherry Picks to be Cool. We’re OK with grifters, but to be on our good side subscribe to our newsletter.

Sharing is caring. Forward this email to your friends so they can subscribe to our newsletters, too! Get weekly data-driven trade ideas with Cherry Picks and daily pre-market insights and trade ideas with Cherry Bomb.

Michael Rechenthin, Ph.D., (aka “Dr. Data”), managing director of research and development, has 25 years of trading and markets experience. He’s best known for his weekly Cherry Picks newsletter. On Thursdays, he appears on Trades from the Research Team LIVE.

Nick Battista, tastylive director of market intelligence, has a decade of trading experience. He appears Monday-Friday on Options Trading Concepts Live. On Wednesdays, he co-hosts Johnny Trades. @tradernickybat

For live daily programming, market news and commentary, visit tastylive or the YouTube channels tastylive (for options traders), and tastyliveTrending for stocks, futures, forex and macro.

Trade with a better broker, open a tastytrade account today. tastylive Inc. and tastytrade Inc. are separate but affiliated companies.



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

Related Posts

tastylive content is created, produced, and provided solely by tastylive, Inc. (“tastylive”) and is for informational and educational purposes only. It is not, nor is it intended to be, trading or investment advice or a recommendation that any security, futures contract, digital asset, other product, transaction, or investment strategy is suitable for any person. Trading securities, futures products, and digital assets involve risk and may result in a loss greater than the original amount invested. tastylive, through its content, financial programming or otherwise, does not provide investment or financial advice or make investment recommendations. Investment information provided may not be appropriate for all investors and is provided without respect to individual investor financial sophistication, financial situation, investing time horizon or risk tolerance. tastylive is not in the business of transacting securities trades, nor does it direct client commodity accounts or give commodity trading advice tailored to any particular client’s situation or investment objectives. Supporting documentation for any claims (including claims made on behalf of options programs), comparisons, statistics, or other technical data, if applicable, will be supplied upon request. tastylive is not a licensed financial adviser, registered investment adviser, or a registered broker-dealer.  Options, futures, and futures options are not suitable for all investors.  Prior to trading securities, options, futures, or futures options, please read the applicable risk disclosures, including, but not limited to, the Characteristics and Risks of Standardized Options Disclosure and the Futures and Exchange-Traded Options Risk Disclosure found on tastytrade.com/disclosures.

tastytrade, Inc. ("tastytrade”) is a registered broker-dealer and member of FINRA, NFA, and SIPC. tastytrade was previously known as tastyworks, Inc. (“tastyworks”). tastytrade offers self-directed brokerage accounts to its customers. tastytrade does not give financial or trading advice, nor does it make investment recommendations. You alone are responsible for making your investment and trading decisions and for evaluating the merits and risks associated with the use of tastytrade’s systems, services or products. tastytrade is a wholly-owned subsidiary of tastylive, Inc.

tastytrade has entered into a Marketing Agreement with tastylive (“Marketing Agent”) whereby tastytrade pays compensation to Marketing Agent to recommend tastytrade’s brokerage services. The existence of this Marketing Agreement should not be deemed as an endorsement or recommendation of Marketing Agent by tastytrade. tastytrade and Marketing Agent are separate entities with their own products and services. tastylive is the parent company of tastytrade.

tastycrypto is provided solely by tasty Software Solutions, LLC. tasty Software Solutions, LLC is a separate but affiliate company of tastylive, Inc. Neither tastylive nor any of its affiliates are responsible for the products or services provided by tasty Software Solutions, LLC. Cryptocurrency trading is not suitable for all investors due to the number of risks involved. The value of any cryptocurrency, including digital assets pegged to fiat currency, commodities, or any other asset, may go to zero.

© copyright 2013 - 2025 tastylive, Inc. All Rights Reserved.  Applicable portions of the Terms of Use on tastylive.com apply.  Reproduction, adaptation, distribution, public display, exhibition for profit, or storage in any electronic storage media in whole or in part is prohibited under penalty of law, provided that you may download tastylive’s podcasts as necessary to view for personal use. tastylive was previously known as tastytrade, Inc. tastylive is a trademark/servicemark owned by tastylive, Inc.