The Wednesday 11/25 rally in Gold caused the Dec 115 GLD Calls (GCZ-LG) to be exited on 3/4 of the positions risk capital (I have established internal +/- 40% option guidelines for 1M ATM options where time to expiry is greater than 20 days and Gamma is between 5-15).
As discussed in a prior post, we have seen a sharp technical pullback catalyzed by the fear of 
Dubai's debt dilemmas, which gave way to a pronounced pullback from nearly all risky assets on the 27th. Managers have finally been reminded that the crisis is not over, and that risk premiums exist for a reason. Fortunately, the systematic trading style has been advantageous in uncertain times like these: the flight-to-quality led resulted in a strong appreciation of the dollar and a nice consolidation on the GLD.
Dubai's debt dilemmas, which gave way to a pronounced pullback from nearly all risky assets on the 27th. Managers have finally been reminded that the crisis is not over, and that risk premiums exist for a reason. Fortunately, the systematic trading style has been advantageous in uncertain times like these: the flight-to-quality led resulted in a strong appreciation of the dollar and a nice consolidation on the GLD.
I am still looking for directionally net long exposure to GLD. I am rebuilding an entry back into the Dec and Jan ATM calls. However, Skew is still biased to the downside and 5% OTM strangles are still too expensive to capture long-vol, based upon historical volatility cone analysis.
So far, profit on the trade has been 38.8% in 3 days net of transaction costs and with vol of 49%, leading to a Sharpe of 0.79 over the trade's duration.
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