Gold stocks are oversold and ready to bounce.
One of the best ways to take advantage of the gold market is buying companies like Royal Gold (RGLD). This company focuses on providing capital to actual gold miners and as part of the agreement they receive gold as a royalty.
Royal Gold is a machine constantly growing revenues and earning a fantastic 25% profit margin.
Royal Gold share price has not been immune to the recent declines in gold prices but the shares appear oversold based on RSI numbers.
After falling to 17 Royal Gold's RSI has increased to 36 suggesting the downtrend is over at least in the very short term.
It is not time to buy shares for a long term position but we have the ability to earn some nice profits in the short term.
Sell the September 21, $77.50 puts on Royal Gold for $1.55 using a limit order. Agree to buy shares at a 1% discount and get paid 2% up front win win.
At expiration if shares are above $77.50: keep the $1.55 or 29.2% annualized return.
At expiration if shares are below $77.50: you will buy shares at a 3% discount to current prices.
For protection use a stop loss at $74. If below $74, Royal Gold will be at new recent lows.
The recent oversold conditions and bullish short term price action makes this a great trade.
Disclosure: I wrote this article myself, and it expresses my own opinions. I have no business relationship with any company whose stock is mentioned in this article.