Saturday, May 18, 2013

Hedge Funds Buying Call Options on Gold Miners

I have good company in thinking that precious metals mining companies are currently a good investment.  Although, $138M of call options seems a pittance for funds that "control over $60B."  Now I will have to keep an eye on when the big boys start to sell.  And, all these call option invite more shenanigan near the expiration dates.

This article is also a good reminder that one cannot know the entire, current picture of a hedge funds position.  These hedge funds, for example, could have recently sold their positions or purchased puts.

I also need to keep being reminded of how much leverage is in the system.  Since I am so conservative it is easy to forget how much risk others take on.  Of course most of these 'high yield' investors are gambling with other peoples money.  All the buying on margin and using derivatives makes market prices more volatile.  Investing only money that I have is one of my few advantages over the big boys.  I also have a longer investment horizon.  My investment performance is not measured quarterly.  No leverage and a long horizon allow me to be patient and wait out short term volatility.  And, that is exactly what I am doing today with my precious metals investments.

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