Getting defensive exposure into the portfolio | Raymond Chan | Finance News Network

Getting defensive exposure into the portfolio

by Raymond Chan

Not only that exposure to gold provides some comfort in the midst of a volatile global economy, rising inflation and financial uncertainty. More so, Newcrest Mining (NCM.ASX) has fallen more than 12% in the last 4 weeks, almost twice as much as the fall in spotgold of 6.5% since early May.

NCM is well managed and owns good assets with siginificant growth potenetial. With NCM at under $38, it provides a good entry point for either accumulating the stock for portfolio of to trade a positive view on the stock.

Options strategy
To purchase stock:
Sell Jun $37.50 put for about $1.00 per contract of 100 underlying shares.
An investor who wishes to buy 1000 NCM, would sell 10 contracts for an income of $1,000.
If assigned to buy shares (where NCM under $37.50 before expiry), the investor buys shares at $37.50 - $1 = $36.50 entry price (vs $37.91 closing price on 18 May 2011).

For traders:
Sell Jun $37.50 put and buy $37 put for about 20c credit per contract

 

 


Happy safe trading!

Wai-Yee

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