Sold 3 ABX 10OCT Puts 46.00 @ $4.15, Mark $43.97, Breakeven exit

My Barrick Gold short isn't working as I hoped. My puts premium is moving closer to breakeven to my purchase price of \$4.00. Furthermore, the market is cracking above resistance levels today. In particular, ABX.TO is marking a bullish engulfing candlestick pattern after a test of its 50-day moving average support (Figure 1). Yes I know, there's a massive resistance at \$44.00 for ABX.TO. But... As much as I'd like to believe in the bears, this short position is not safe anymore. I can't let a positive trade turn negative. It's better to miss an opportunity than lose money. So I'm ditching this now to reduce my risks at above breakeven seeing that I have another smaller short position in play. Which is underwater at the close, by the way. My return on this trade is (\$4.15 - \$4.00) * 100 * 3 contracts = \$45 - \$12.95 x 2 commissions = \$19.10 I'm just lightly short now and mostly in cash.

[caption id="" align="aligncenter" width="570" caption="Barrick Gold (ABX.TO)"][][][/caption] [caption id="" align="aligncenter" width="570" caption="ABX.TO intraday"][]1[/caption]

Posted 15 June 2010 in stocks.

Bought 3 ABX 10OCT Puts 46.00 @ 4.00, Mark $44.67

Right on the heel of my oil short loss, I am taking another stab at shorting the market. This one is Barrick Gold (ABX.TO). I am moving away from shorting financials because the puts premium are almost doubled that of the calls! It seems that too many people are betting the banks will take a hit in the next fall. In the long term, ABX.TO appears to be in an up trend. However, the intermediate trend is turning negative as shown in Figure 1. \$45 is an obvious resistance for ABX.TO. Even with today's positive market moves, ABX.TO fail to catch on the bullish wave and only touched \$44.86 in the morning optimism (Figure 2). Who knows, perhaps it might break it sooner than later. But the reward/risk is decent to short ABX.TO seeing that the \$45 resistance is right above.

[caption id="" align="aligncenter" width="570" caption="Barrick Gold (ABX.TO)"][][][/caption]

I will give it a month's time to move below \$44.00. Worst case stop loss is \$2.50 on the premium. That is (\$2.50 - \$4.00) x 100 x 3 = -\$450 - \$12.95 x 2 = \$475.90 = 5% of account total. My mental stop is \$3.00 on the premium. Which is about 3.3% of my account total.

[caption id="" align="aligncenter" width="570" caption="ABX.TO intraday"][]1[/caption]

Posted 10 June 2010 in stocks.