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!



Information/strategies/trading ideas in this blog is provided for general information purposes only and is not intended as an offer to enter into any transaction. Information contained in this blog is not necessarily complete and its accuracy cannot be guaranteed. Information/strategies/trading ideas here have been prepared without consideration of the investment objectives, financial situation or particular needs of any individual investor. Before a client/investor/reader makes an investment decision, a client/investor/reader should, with or without RBS Morgans' or the author’s assistance, consider whether any advice contained in this blog is appropriate in light of their particular investment needs, objectives and financial circumstances. It is unreasonable to rely on any recommendation without first having spoken to your adviser for a personal recommendation. The use of options may not be suitable for all investors. Potential investors are recommended to seek professional advice before embarking on any strategies mentioned in this blog. The information/strategies/trading ideas contained in this blog have been taken from sources believed to be reliable. Neither the author nor RBS Morgans Limited represent that the information is accurate or complete nor should it be relied upon as such. Any opinions expressed reflect the author’s judgment at this date and are subject to change and is not necessarily that of RBS Morgans'. RBS Morgans and/or its affiliated companies may make markets in the securities discussed. Further, RBS Morgans and/or its affiliated companies and/or their employees from time to time may hold shares, options, rights and/or warrants on any issue included in this blog and may, as principal or agent, sell such securities. The Directors of RBS Morgans Limited and Grosvenor Sydney office advise that they and persons associated with them may have an interest in the above securities and that they may earn brokerage, commissions, fees and other benefits and advantages, whether pecuniary or not and whether direct or indirect, in connection with the making of a recommendation or a dealing by a client/investor/reader in these securities, and which may reasonably be expected to be capable of having an influence in the making of any recommendation, and that some or all of our representatives may be remunerated wholly or partly by way of commission. Information in this blog is proprietary to its author and may not be copied as your own or used for any other purpose without the prior written consent of the author. RBS Morgans Limited (ABN 49 010 669 726 AFSL 235410) A Participant of ASX Group Principal Office: Level 29, Riverside Centre, 123 Eagle Street, Brisbane QLD 4000

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