Gold Option

We might have to fight for our right to party, but if what we really want is the right to buy or sell gold at a particular price on or by a particular future date, then all we have to do is buy gold options. Because that’s what gold options do.

We can either buy a call (the right to buy gold at a specific price on or by a specific date) or a put (the right to sell gold at a specific price on or by a specific date) or, if we’re feeling hedgy, we can buy both calls and puts and really go wild.

Something that’s probably worth mentioning: when we buy gold options, we’re buying the right to buy or sell, but not the obligation. If our option’s expiration date is approaching and we decide we don’t wanna exercise it, we don’t have to.

Why wouldn't we? Because it might not be financially advantageous for us to exercise an option if the value of gold is lower (in the case of a call) or higher (in the case of a put) than we need it to be to make us money.

Something else that’s probably worth mentioning: when we buy gold options, we pay a premium for the privilege. Even if we don’t end up exercising those options, we still pay the premium. That’s just how it goes. It’s like the nonrefundable deposit we have to pay on vacation rental homes: even if we end up canceling the vacay because the entire family somehow came down with pneumonia, we’re still out the deposit money. That’s the bad news. The good news is that that’s the only money we’re out. This limited risk is why options can be an appealing choice for investors. But just as we wouldn’t advocate renting a vacation home without looking at some pictures and a map and reading some reviews, we also wouldn’t advocate buying gold options without doing a little homework and research first.