MM59 - GDX MSL

Today I want to talk about a new topic, one you have not heard me cover in any of the communities we follow. This is not financial advice. I am not a CPA and I am not a trading advisor.

With that out of the way, let's talk about gold.

I know a lot of you do not do much with the metals, and that is okay. This trade might not be for you, and I want to be honest about that up front. I have been trading metals and gold since I got started back in 1997, and it has been very good to me when I have used it and timed it correctly. But if you are a newer trader without a lot of working capital, this may not be your trade. It is going to tie up some capital for a few years.

Having said that, I would not be looking at this at all if it did not check off every single box for me. Growth, well over a 3x potential, and a lower risk trade in my opinion. So let me show you what I am looking at.

About a month ago I started building a silver position in SLV. I have been patient. I only put half of my intended commitment in so far, and today I actually sold out half of the puts connected to that SLV position. So where does the other half of my capital go? That is the real question, and the answer is where this gets interesting.

Add to silver, or diversify

I had a choice. Do I add to my SLV position here, or do I diversify a little? I chose to diversify. I am going to buy GDX, the gold miners.

 Let me give you the volatility ladder so you understand the risk order, because this matters when you size a trade. Lowest volatility is straight GLD, buying gold itself. Next step up in risk is GDX, the gold mining stocks. Then SLV, which is the silver play. And highest is SILJ, the silver miners. For example, If Gold has a day where it falls 3% expect SLV to fall 6% etc.

Here is my math example: