How to Invest in Gold Options
Gold has glittered for many investors over the years and the future, according to many financial professionals, still looks golden. Rachel Benepe co-manager of the First Eagle Gold Fund, one of the top performing gold funds in 2009, called it the ultimate money mattress and said "Today, investors' risks include inflation, deflation, currency debasement and geopolitical concerns. We recommend a five percent to 10 percent allocation to gold. Individuals can invest in gold in several ways, and gold options are one method.
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Things You'll Need
- Brokerage or online investment account
- Approved, updated and signed option and/or commodity papers on file
Instructions
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How To Buy Gold Options
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Establish an account. Set up an account at a brokerage or an online firm. Also, commodity papers and option papers must be signed and received before any trade can be executed. Contact a registered futures broker when trading gold options. A reputable and knowledgeable registered options broker can also provide you with a number of option contracts on gold-related securities.
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Buy put or call options. A buyer of a put option contract on gold gives you, the owner, the right, but not the obligation, to sell a specified amount of an underlying (gold) security at a specified price within a specified time. A put option is the opposite of a call option, which gives you, the holder, the right to buy (gold) shares.
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Trade options on gold stocks. Options on gold stocks, gold mining companies and exchange traded funds (ETFs) are available, and are an efficient and easy way to trade gold options. Investors can trade these options through a stockbroker or an online account and may be available for a small investment.
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Stay alert and up-to-date with the markets in general and read financial newspapers for comments and concerns. One of the best gold websites is Kitco.com. This site offers a plethora of information as well as prices and commentaries. It is possible to lose an entire investment when investing in gold options. Understand the risks and don't bet the farm.
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Tips & Warnings
Gold options can be extremely volatile and risky, and may be better suited to the sophisticated and savvy trader. You should never invest more than you can afford to or are willing to lose.
