Editor’s note: Today, we’re doing something a bit different.

Recently, Jeff’s subscribers booked a big win in the gold sector. And Jeff had the idea of showing his Market Minute readers exactly how they pulled it off.

Read on to see how…

As you might have heard, we recently launched a new trading service: Jeff Clark Trader.

It’s designed for beginner option traders. Folks who want a simple way to trade. That’s why, in Jeff Clark Trader, we only trade three stocks. That’s it.

Why? Because we want folks to learn the mechanics of options trading, without getting lost in the weeds of the countless stocks available to trade.

The best way to develop those skills is with practice and repetition. So today, I’m going to recap our very first trade in Jeff Clark Trader… And walk you through exactly how we booked a 117% gain on GDX in just over three weeks.

But before we get to that, let’s look at the tools I used to identify the winning trade…  

  1. GDX is the VanEck Vectors Gold Miners exchange-traded fund (ETF). It tracks the performance of companies in the gold mining industry.

  2. The GDX/Gold Ratio. This ratio is the best way to spot turning points in the gold sector (read a more in-depth explanation right here).

  3. The 9-day exponential moving average (EMA). This is simply the average price the stock has traded over the previous nine trading days. It’s the defining line for the short-term momentum of a stock or index.

(You can find these tools on any charting site. My favorite site, which I use to create charts for all my services, is StockCharts.)

Now, let’s look at how we used these tools for a quick 117% gain.

Take a look at the GDX/Gold Ratio chart…

The GDX/Gold ratio broke above its 9-day EMA on May 8 (the blue arrow above). That’s a bullish sign.

But I didn’t rush into the trade. Instead, I patiently waited for a confirmation. Here’s why…

I wanted to see the GDX/Gold ratio continue trading above its 9-day EMA, and ensure the bullish momentum continued, before I recommended a trade. And it did.

Then on May 16 (the red arrow), we got a great opportunity…

It pulled back to its 9-day EMA, which was acting as support. So, I recommended that my subscribers buy GDX July 19 $21 call options for $0.62.

Take a look at our entry point (the red arrow)…

As you can see, we were a little early. We had to sit through two weeks of choppy, back-and-forth action.

But then… gold stocks exploded higher on Friday, May 31. And that rally continued.

On June 3, I decided to sell half of the position. Here’s why…

The main purpose of trading options rather than the underlying stock is to REDUCE RISK.

This is where a lot of novice traders get into trouble. They use options as leverage, and go overboard with their position. They buy too many lottery tickets, thinking they’ll strike it rich overnight.

And if the trade goes against them, they can take a huge loss.

So, option traders should always be looking for ways to take money off the table and reduce or eliminate the possibility of taking a loss on a trade.

That’s why, no matter how good a position looks, I ALWAYS trim profits once I’ve doubled my money on a trade.

So I did. I recommended to sell half of the GDX July 19 $21 calls for $1.35, and we recorded a 117% gain.

[If you’d like to see Jeff’s full track record – wins and losses – click here.]

By selling half the GDX calls for a 117% gain, we put our original investment back in our pocket. And eliminated the possibility of taking a loss on the trade.

The GDX trade continues… I’ll let you know how it plays out.

Best regards and good trading,

Jeff Clark

P.S. I hope you enjoyed this quick trade recap. Let me know if you’d like to see more, along with any other thoughts, by emailing [email protected].

And, if you’re interested in learning more about options and trading with me, check out Jeff Clark Trader. It’s only $19 for a whole year – a no-brainer.

I’ll write to you again on Monday. Have a great weekend.