Get paid to be long Gold

Gold has put in a near term bottom, and is slowly making higher highs and higher lows since the June 28th bottom at approximately $1140/ounce.  The easist way to invest in gold is through the exchange traded fund GLD. We like the signs that we're seeing that support gold moving even higher over the coming months, and we executed an option play today to capture long exposure to GLD.  

The best part about this trade is that we are getting paid to make this trade!  We sold the October 2013 $114 Puts on GLD for .57 cents, and bought the October 2013 $150 Calls for .50 cents.  Thus creating a paired position that pays us $7 per contract before trading fees, while maintaining bullish exposure to gold moving higher.

If GLD drops below $113.43, we will likely get put the shares, in our case 300 shares since we executed 3 contracts.  However, if it moves higher, the puts will decrease in value, which is what we want, and the calls will also increase, which will give us an additional profit.  We like this play vs. buying the calls alone since we're not out any money to put this trade on in our account.  You will have to maintain margin requirements on the short put, so make note of that.  We always maintain enough cash in our tradng account to cover getting put any short positions, and we don't recommend doing this on margin -- although you can certainly do that if you want to take on additional risk and close out the puts for a loss vs. being forced to buy the stock if GLD drops to the $114 range.