Gold, Toll, Radio Shack

On the whole, benign economic data, in particular under control labor costs, are pushing the dollar a bit higher and gold lower. We set fairly tight trailing stops on our futures trades and got stopped out of Gold at $649/oz. Gold went as low as $643 today (that would have hurt if we didn't get stopped out at $649). I am still very bullish on gold and will look for a re entry point keyed to a rebound in the Euro. We've been in and out of gold since the $620's and it's been a large factor in our 200%+ performance in trading futures this year and I think there's a lot more gain to come from gold and especially energy.

I've got to say, that I'm a lot more comfortable trading energy and glad to be taking a breather from gold. Your can cut the tension with a knife in that market. The crowd is on constant edge wondering when the next bout of Central Bank selling is going to come in, or when a monetary official is going to try to sound a hawkish tone on U.S. rates or sound a supportive tone on the dollar, or when bad news is going to come in that not enough gold buying is happening by jewelers in India. So they've all got their itchy trigger finger on the "sell gold" button. The bulls may have to deal with a "wall of worry" in the stock market, the gold bugs are scaling a chasm of worry.

I also stopped myself out of the Toll (TOL) puts. Options presents far more of a trading challenge to me than futures since you're not only dealing with the question of supply and demand, but also time value and volatility -- plus something that can be very hard to value: SPIN. While the Toll warned, lowered earnings guidance, etc - the stock is rallying by 4% because they said they see evidence of a turnaround. You can't blame Wall Street for taking their word even if macro eco data shows the economy is heading for hell in a handbasket. There are two cardinal rules in options: 1. Always begin to take money off the table when you double your money (which we've done many times); 2. always cut your losses when your positions drops by 50% (which we've fortunately done less times than #1) - and that's what we did with the TOL puts this morning.

We've been watching Radio Shack (RSH) December 17-1/2 calls trade today... more than 4,000 contracts, which is double the open interest.