Im not an expert in investing but i have invested in gold, silver, copper, and other precious metal ETFs, as i'm sur e most of you have. I'm talking almost 3X gain on these funds.

With the massive uptick in the value of these funds, etc. does anybody think there should be an exit strategy for a pending similar massive selloff.

Better said, is it a good idea to take the huge profits now in order to hedge against a future decline?

Any advice or criticism is appreciated.

Thanks,
Tim

Not saying it's the right move for you, especially if you're unfamiliar with them… but if you wanted a minor hedge, consider selling covered calls.

GLD and SLV have volatility higher than it's been in the past 12 months (at least). So premiums are extremely good (but so is the risk of holding).

Yes - I'm hedging gains via puts, covered calls, and incremental sales. Here's some suggestions (please do your own analysis):

1. Sell a portion - clearly selling enough to cover your initial purchase price is a solid idea, but you may want to do more, either via setting stops or limit orders on the upside.

2. Buy puts (which I'm doing) - you can either select a strike price that's near the money, which can insulate you from most downside risk for a short term, OR buy way out-of-the money puts to protect against a major slide in price. I do the latter, as a form of extreme downside insurance. CAUTION: Premiums are juiced, so either of these can be expensive as compared to a period of low volatility.

3. Write Covered calls - Since premiums are juiced, you can sell near-the-money or out-of-the-money call options. If you're looking for an exit, choose the first - if you really want to let it ride, but collect income, choose the latter.

Just a start to your trading/hedging journey. There are other strategies, but this is a starter list. Ask questions if any of this doesn't make sense...

Another idea if you're game for options… buy puts on the miners… they almost always take a bigger beating than the mineral. (See GDX and SILJ for examples)

In a taxable account, this also has the advantage of not being seen as an offsetting position.

deadbq03 said:

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Another idea if you're game for options… buy puts on the miners… they almost always take a bigger beating than the mineral. (See GDX and SILJ for examples)

In a taxable account, this also has the advantage of not being seen as an offsetting position.

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I hedged with puts on GDX, but unfortunately was a little early (bought them over two weeks ago).

While your statement is generally accurate based on the past, the miners also gain leverage from making money (if they're run well) on extraction and operations. So, in theory, they should be less volatile. However, stock analysts just plug in a devalued future stream of income based primarily on the price of the metal, so we get similar volatility (or worse) from the miners.

Yeah I was probably overly ambitious saying "almost always" - but yes, the market seems to tolerate little uncertainty with the miners and it doesn't necessarily make sense. Though I would add that the fact that many of them are foreign and/or carry a decent amount of debt adds to their uncertainty. Gold itself will always be worth something but many a mining company has closed shop.

I have two metals investments.

First is a metals ETF that I bought 10 years ago. It was flat for a long time and then doubled in the last two years.

The second was a stock that was in the copper mining business. I have owned it a shorter time, but it has tripled in the last couple of years.

I sold half my interest in both of these this morning to lock in some profit. Didn't want to get greedy and then watch it drop like a rock down the road. I will sit on the proceeds for a few weeks or months then decide what to do. Do not take this as advice. I am bad at picking stocks.

Great perspectives and discussion points

deadbq03 said:

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Yeah I was probably overly ambitious saying "almost always" - but yes, the market seems to tolerate little uncertainty with the miners and it doesn't necessarily make sense. Though I would add that the fact that many of them are foreign and/or carry a decent amount of debt adds to their uncertainty. Gold itself will always be worth something but many a mining company has closed shop.

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Absolutely agree. I am not even sure why so many are Canada-based (maybe less pushback in foreign lands than a US company would experience?).

And Burdizzo - good job! No one ever went broke from taking a gain.