Gold – tough market, but there is always an angle

$900 seems like a key level for Gold. This chart from March 2009  shows several points of resistance and support. Generally speaking the more a level is tested either as support or resistance, the more significant a breakaway becomes.

Does this forecast near term direction? Not quite. But it does imply a breakaway within the next week or so will be followed by a decent move.

The first thought, then, is a long straddle/strangle, but implied volatility is extremely high. A 77-day 850/950 long strangle for example currently costs $75. In times like this, one would be better off buying/selling futures on a breakout. One could even throw in a short strangle with distant strikes to pay for the stop loss on the futures. There is always an angle…