The turmoil in Europe over whether Greece will be forced out of the Eurozone has been a growing concern for investors as the crisis has worsened in recent weeks.
Sure, politicians and Greece's creditors might find a short-term solution any day now, but we all know what happens when you "kick the can" of debt down the road… the problem usually gets worse.
Most Greeks want their country to exit the euro, but I don't believe they fully understand the consequences of that. Yes, it will get the International Monetary Fund and the European Central Bank off their back.
But it will also cause shortages of essentials, rising prices, and further economic pain for the average Greek. This could lead to civil unrest.
If the "Grexit" does take place, there's a good chance investors around the world will look for safe havens. There is one that could be poised to rise in the coming weeks, even if Greece's problems do not come to a head. In that case, I'll show you a way to double your money.
And if Greece does implode, the trade will be even more profitable…
Gold Could Rise or Rocket Depending on Greece
If the Grexit crisis escalates, one safe haven investors will consider is gold. The yellow metal has been languishing lately. Since February of this year, the SPDR Gold Trust ETF (NYSE Arca: GLD) has been stuck in an 8-point trading range with support at 110 and resistance at 120. This is the tightest range in years.
What is it going to take to get this metal on the move again? Well, a major Eurozone catastrophe could do the trick. But even without that, as Money Morning Resource Specialist Peter Krauth noted yesterday, there are reasons to believe the coming months will be profitable for gold investors.
Let's look at the Money Calendar for some clues…
Find out more about Tom's patent-pending "Money Calendar" right here…
At left is the data for GLD's performance from the end of June into the first week of August over the last 10 years.
In seven of those years, the price of gold and GLD have moved higher. The increases outpaced the moves lower by a rate of greater than 2:1. That means not only did the price move up more often than not during the summer, but the amount of the increases were greater.
What could we do to take a position in GLD and create a built-in stop to protect us in the event that we are wrong about GLD's prospects over the next 30 days or so?
Well, a call option on GLD makes perfect sense, and here's why.
- The Pricing: Not only is GLD cheap in terms of price, but its call options are cheap due to the ETF's lack of movement. (The volatility of a security is a big factor in the cost of its options.) The premiums for short-term strikes are lower than their averages in the last year.
- Lower Support "Bounce": With the price of GLD bouncing off support at 110, there's a solid chance that the ETF will head toward the top of the range.
About the Author
Tom Gentile is one of the world's foremost authorities on stock, futures and options trading.
With more than 25 years' experience trading stocks, futures, and options, Tom's style of trading systems and strategies are designed to help individual investors propel themselves past 99 percent of the trading crowd.