SK Option Trader Outperforms Every Gold Mining Stock Using Options
To cap off our recent focus on mining stocks, in this article we look at how mining stocks performed over the same time frame in which we returned 70% to subscribers.
As we’ve communicated before, the traditional justification behind investing in gold mining stocks is something akin to the following:
“The simplest way to speculate on rising gold prices is to buy gold itself, this is no secret. However some investors and traders wish to add leverage and optimize their position to increase their exposure and profits. Traditionally, investors would buy gold mining stocks to increase exposure to the gold price. The rationale behind this theory is arguably based on sound accounting principles but fails in practice…
…Not too long ago when financial markets and instruments were far less flexible and available than they are now, leveraged exposure to gold was very hard to achieve. Gold stocks used to be the best way for the ordinary investor to increase exposure in the search for higher returns…”
We avoid gold mining stocks because
- Gold stocks don’t accurately track the gold price, often the relationship is inverse
- 2. Mining stocks are exposed to numerous economic, political and managerial risks that are not compensated for. These risks are elaborated on in “Are Gold Stocks the Real Barbarous Relic?”
This chart gives weight to our attitude towards mining stocks:
Counter to the traditional wisdom of mining stocks outperforming gold, the reality is quite different. Gold has returned over 4x the HUI (shown by the red line) gold mining index.