How to Trade Gold with ETFs and Options

With few exceptions, most leading financial gurus agree that every portfolio should include some physical gold. But while the yellow metal itself is great as a long-term hedge against turmoil and inflation, it's a lousy trading vehicle. Here's why. For shorter-term trading purposes, most gold investors look first to the futures markets, generally focusing on either the CME Group's full-size COMEX contract , which represents 100 ounces of the metal, currently valued around $165,000, or its little brother, the 50-ounce miNY gold future . However, that can be a fairly costly proposition, with initial margin requirements on a single 100-ounce contract running in excess of $10,000. And, as anyone who has held those contracts in recent weeks can attest, it can also be an extremely risky one. For example, the single-day loss on a 50-ounce miNY future on Feb. 29 was $3,845, with the intraday trading range topping $5,200. Similarly, last Wednesday's one-day decline of $51.30 an ounce in the price of the full-size April future would have cost traders on the wrong side of the move a whopping $5,130. Even recent intraday moves have been scary. On March 9, April gold futures plunged $27.70 an ounce shortly after the open, only to rebound and trade as much as $39.50 an ounce higher later in the day. That swing had a total value of $6,720 - in a single 5-hour and 10-minute trading period! So, if those numbers give you pause, but you'd still like to mine for profits in the gold market, what can you do? To continue reading, please click here...