#SaxoStrats: SPDR gold shares ETF looks oversold
The ETF SPDR Gold Shares is now oversold and is giving us a buying signal in stochastic term.
Let's buy the June 16 116/118 Call Spread to play a bounce back on Gold with limited downside risk.
Buy 10 GLD Jun16 116/118 Call Spread at $0.77
Buy 10 GLD Jun16 116 Call at $1.48
Sell 10 GLD Jun16 118 Call at $0.71
Maximum profit equals the short Strike Price minus the Long Strike Price minus the Premium Paid.
So the Maximum profit equals 118 - 116 - 0.77 = 1.23.
The return on investment is the profit/premium times 100. That equals $1,230/$770 times 100' which equals 159.74.
Maximum loss is limited
Time horizon: 17 days.