Here’s how I’m trading $NUGT. (August 27, 2019)
NUGT GDX NUGT DUST NUGT
Today I want to look at NUGT ( NYSEARCA: NUGT ). This is this a triple ETF based on the GDX( NYSEARCA: GDX ); you will notice the charts are exactly the same only the magnitude is different. This jumped 3.14 percent, this jumped 9 percent today, so this we like better IF you are on the right side of the trend.
These triple ETFs, what a lot of people don’t know and frankly I don’t care, but a lot of people don’t know that they rebalance at the end of every day. In other words, it’s kind of like every day starts off at the starting line, supposedly. What these triple ETFs were really designed for, frankly, was for traders to catch up. If you wake up one morning and say like, OMG we need to get more gold in our allocation for our big portfolio you wind up buying something like NUGT ( NYSEARCA: NUGT ) here and then you can kind of catch up. It runs three times as fast as the GDX( NYSEARCA: GDX ).
I don’t really care about all that stuff because a chart is a chart, that’s all I care about, really. I know there are some mathematical reasons why I should find that to be important but I don’t. There are some reasons why I shouldn’t be eating beef but I do. In this case, getting away from the whole beef and vegan and all of that stuff, the chart works. This is a really, really volatile chart within a trend. You can see from bottom to top here, this at 34 percent run. I’ll take that thing any day unless I’m short here. By the way, you can go the opposite way if you’d like and go DUST ( NYSEARCA: DUST ) it’s literally the opposite trade only this is $6.00 bucks as opposed to $45.00.
Here’s what I like to do, and members know this, we’ve had what seems like quite a bit of trade along with Dan over at Stock Market Mentor and Option Market Mentor, which I think is fine. What I do with this, now I’m just a whole bunch of NUGT ( NYSEARCA: NUGT ). I’m short some puts, I’ll tell you exactly what I’m short, I am short some September 20th $37.00 puts. So there are 24 days remaining, I shorted them at $2.50 a while ago, now they’re worth a $1.86 so I’m making $0.65 on those so far. That’s just effectively reducing my cost basis in the underlying stock.
I like to trade a triple ETF like this as long as it is an uptrend and this is not chaos. You might look at this and think it is chaos but it’s really not it’s actually in a fairly predictable range. You get a downtrend there, a sell-off. Then you get a move higher there, then you get a sell-off here. Then you get a move higher, up to here, and then you get a sell-off down here. And finally a rally, we’ll say, up to here and maybe beyond.
But what you will notice is that the width of these boxes, while not exactly the same, it does kind of give you a sense of how much this stock moves in one direction before it reverses. And that is what I like about it and that is how I trade these options. For example, if we just look at this here, this peaked here and then we’ll say here; 8 days, 8 trading bars later it bottomed. And then it took another 9 bars for it to peak. And then it took another 10 bars for it to bottom. And then it took another, just 4 bars but it kind of stayed up here for 5 or 6 bars, and then we got the same type of here. Down here 6 bars, etcetera, etcetera, now we are still going here at 6 bars and who knows how high this will go.
I expect the next move to be downward simply because this is the way the stock has traded, zigzag, zigzag, zigzag, what, zig? No, I would expect the next move to be down here. And so what I do is, I’ll hold the stock and then I sell calls and puts about 2 weeks out with about, ideally, 14 or 15 days remaining and that way I don’t have to ride through a zig and a zag. Let’s say I sell the calls here and then I look for another week or two, where this is down, I’ll buy back those calls and I’ll sell puts on the other side of the trade. And then when the stock runs up I will buy those puts back at a good profit and I’ll sell further out of the money calls. And then when this pulls back I do it again and again. You can say, “Well yeah, but you’re losing money on the stock.” Well yeah, but you can hold any stock that’s in an uptrend and there going to be days when you’re going to be losing money in it because stocks don’t go up every day, we just wish they did.
This is a really good way to be trading NUGT ( NYSEARCA: NUGT ). I mentioned this in the forum today, this is actually the stock, I’ve traded a boatload of stocks this year, more than I should have frankly, but this is a stock that I’ve made the most money on by far this year, just by doing the basic strategy that I discussed here. It really kind of started back here when this had a big massive jump to the upside. There was really nothing going on here that was particularly interesting and then this happens and now suddenly it gets my attention and so here we are all this time later.
So try this strategy with your own trading. As long as your timing it, as long as you’re in sync with the trend, both the daily trend here with the zigzags and then the intraday trends as well. There are all kinds of different time frames that you need to look at this. But as I see this, this is not a stock that’s about to sell-off. Now it might, but that’s not what you’re getting from this chart. If you’re looking at this saying, “Oh, this is going up enough. It’s going to reverse.” You don’t know that. And if you think you know that, frankly, you’re kind of stupid. You probably think you’re really smart because you know more than the stock, but you really don’t, you just think you do.
Again, if you think you’re really smart you’re actually kind of not. Here, this is a really strong uptrend. I do not know whether this is going to continue higher or whether it’s going to reverse lower. My point is, neither does anybody else. But I’ll put the odds on my side in the same way as Newton seemed like a pretty smart guy when he says, “Objects in motion tend to stay in motion unless acted upon by an outside force.” So here we’re just waiting for an outside force I guess, but so far so good, the trend is up, and I think you can continue to be long this. I would just say with this kind of volatility you really need to be incorporating options into this type of a trade.
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