Selling GDX puts to open

Selling VanEck Gold Miners (GDX) June 34 Puts

Earlier this week in SentimentEdge, we looked at the surge, then plunge, in gold miners. Similar behavior over the past 40 years has preceded rallies in GDX over the medium-term.

GDX is trying to bounce today and has moved above its prior day high, suggesting the selling pressure could ebb. I'm not a big fan of buying strength in gold and related funds, but the study above is compelling. There is potential support around 34 in GDX, though I don't put a lot of weight on such things.

So, I'd like to add some exposure but don't have a good handle on whether the selling pressure has run its course. Implied volatility is a bit pumped up from where it had been a little over a week ago, so I'm selling 2 June puts to open. That gives me a little bit of premium in case GDX does turn around here and lowers my cost basis on an entry if it fails and declines toward potential support.

Not intended as investment advice. In this account, we roughly follow what has become known as the All Weather portfolio popularized by Ray Dalio. It allocates across four broad assets, designed to hold up no matter the market environment. The goal is modest positive returns while limiting large, sustained losses. We typically use popular ETFs, with low costs. At times, we will swap out for a fund we believe has better prospects, or simply lower fees if not. At other times, we will diverge quite a bit from baseline allocations, largely depending on the indicators and studies we discuss on the site. The base allocation includes stocks (35%), bonds (35%), gold (5%%), commodities (5%) and cash/other (20%).