Hello all,
I have a rather sizable position in several mutual funds in my IRA. Some of the commodity funds have had nice moves already this year for example TGLDX (is a gold fund).
I don't want to sell this position because I feel Gold may still have some upside, however I don't like all the risk I'm taking on the downside at the moment. What strategies can I use to protect my mutual fund positions??
Thank you all
One approach would be to buy the appropriate puts in the IRA. Brokers will let you sell covered calls and buy puts and calls in IRAs.
-- Rich Carreiro snipped-for-privacy@rlcarr.com
TGLDX has some corporate risk in addition to the price of gold risk. Sell TGLDX and buy GLD, you will then be able to sell calls against GLD which you can't do against TGLDX.
-- Ron
I'll answer as if you owned gold, and not a fund. Protective puts are a strange thing for this purpose. With volatility so high, the Jan 2010 at the money put will cost you $12.60 (for the $91 strike) on GLD which is $90.10 as I write this. So this insurance costs you 14% (ignoring the dollar mismatch) for just about 9 months of protection.
On the other hand, as Ron suggested, you can sell the $90 call for about $12, but lose any potential gain beyond that.
It's tough to have it both ways.
BeanSmart website is not affiliated with any of the manufacturers or service providers discussed here. All logos and trade names are the property of their respective owners.