Theta Burner Of Death

UPDATE 9:38am EDT: Happy April Fools Day, rats! That was quite a nice open and my puts are liking it. I was tempted to take profits on my puts but the wave count looks incomplete, no matter how tempting after yesterday’s murder rally. Exception was WYNN, which I swore to never trade again months ago and somehow bent that rule on Monday (and was instantly punished for it).

Anyway, I think we have a decent chance to hit 775 today but if you’re conservative take at least partial profits here as this is a support shelf.

Okay, on to our subject title – our theta burner du jour – Gold. It’s been driving us nuts for over a month now but let me tell you right now that this is nothing uncommon. The few spots I highlighted on the chart are just recent examples of its theta burning powers – Gold is infamous for driving you nuts for weeks on end. Then, after you threw in the towel and finally gave up it makes a huge move within a day or two and you kick yourself for being so impatient.

Which is why I always always always buy an extra month in time when trading GLD options. I have traded Gold futures for years and when trying my luck with GLD options I had to learn this the hard way. You see – although you need to roll over into new contracts every few months in the futures there’s no such thing as theta burn. So you can happily hold a ZG or GC contract for weeks and not lose much unless price moves against you. Options are obviously a different beast and especially when it comes to precious metals related options. Just take my word on this and buy that extra month – you might buy too much time if you’re lucky but in a majority of the cases you’ll be happy you did.

That said – Gold is driving me crazy – someone please remind me why I’m trading this damn thing? Must be something about the shiny stuff – the vision of instant riches. Plus I live in California – I think some mental switch gets thrown when you cross our state border (besides transporting hot minors across state lines I mean).

BTW, geckoman – you can bite me. Consistently been wrong on Gold? Exqueeze me? I shorted SLV and GLD a few weeks ago and was spot on. Also, I was consistently right all of 2008 when everyone was giving me a hard time about going short. So, please check your records before you spread false news. My track record on Gold has been pretty good – ask around.

UPDATE 10:10am EDT: Ouch – that wasn’t fun – somehow we switched into reverse gear. Well, we filled the gap on the ES futures – let’s see what happens next. Frankly, I’m not going to be a hero here and admit defeat if we push much further. The wave count would have looked ‘prettiest’ had we completed a nice a-b-c but that was quite a bounce off the 783 mark.

UPDATE 10:39am EDT: How do you feel right now? I’m serious – this is a great time to analyze your mental state. We just had a big drop followed by a huge counter rally. Are your instincts screaming at you to sell those puts you were holding? They are sure doing it on my end! 😉

However, this is usually the time when you should use your brain. I’m not saying we’re not going to drift higher – actually it’s looking like the bearish case is close to getting buried. But before you scale out – ask yourself if your system’s line in the sand has been breached. Think before you act – don’t let your emotions do the trading.

With that said – apologies to geckoman – didn’t mean to openly chastise you. Just don’t like people spreading false news about me. To the rest of you rats: The celebrity death match in the ‘cage of death’ between me and geckoman is still on – after all I can’t get back the deposit for the catering.

Anyway, let’s all settle down now. This was quite punishing and it’s what I get for trading against the major trend. We’re about to breach 800 on the ES, which probably is my line in the sand for scaling out and admitting defeat.

Someone still needs to explain to me where all this fucking buying suddenly came from. Your tax Dollars at work? 😉