As a gold trader, I’m always looking for an edge. I’m not talking about looking at a stock chart, because stock carts are so over rated as a tool to trade with. Why? Because everyone can see a chart. There’s no inside information there. And the market has a highly random component. No one knows what will happen tomorrow. And unknown to you = random. Plus, the gold chart isn’t suited well for technical analysis since the metal is so influenced by currency changes – the price action is not primarily driven by technical price and volume levels…
What I’m talking about is inefficencies created by traders. In my studies of options activity on gold, we have two components. The actual put call ratio and the put call ratio on the open interest. The ratio of these two data points tells you when there’s an inefficiency – when the pcr is deviating from the oi pcr – and this generates an opportunity.
We have one of those opportunities RIGHT NOW.
Before I show you the data, I must remind you that not every one of these inefficient events will result in a winning trade. And the efficiency of the signal is unknown until it plays out. Meaning the signal may produce a 1% monve (yawn) or a 10% move, which can make you a healthy sum, whether you want to play it by trading GLD, a 2x leveraged ETF on gold, or Gold options…
So here it is:
As a trader, you want to trade extremes. And extreme highs and lows are opportunities to take advantage of future price movement. This extreme is als following a peak in call buying generated in the beginning of July. That peak is working it’s way off, but has not reached an extreme in Put Buying – where at that point, I would get more bullish on gold.
This is only one of a few of our timing indicators on gold.