• Market:  April 2006 Gold (GCJ6)
• Tick value: 1 point = $10.00 
• Option Expiration: 03/28/06   
• Trade Description: Short Condor Market Neutral Credit Spread
• Max Risk: $600.00
• Max Profit:  $1,400

Buy one April Gold (GCJ6) 575 call, buy one April Gold 530 put, and sell one April Gold 550 put and sell one April Gold 555 call, on the same ticket, for a combined credit of 140 points ($1400.00) or more to open a position.

Technical/Fundamental Explanation
The metals complex continues to attract attention and investors but in the near term we are seeing the market struggle to maintain itself. Long term bull markets need temporary setbacks or consolidation periods to ultimately continue higher. These consolidation periods are easily seen on long term monthly charts but can be harder to "see" on your typical daily chart. I believe we have entered one of these consolidation periods and that we will see Gold trade on both sides of 550 over the next 30 days at the least. One indicator I would point to is the "CNBC indicator"...this simply says that by the time CNBC gets around to reporting it, the move is all but over. Recently CNBC has been talking about Gold and how enthusiastic investors are in the market. While this may be true, the "smart money" saw this trend taking shape almost 5 years ago. So to now say that gold is hot, is a little late to say the least. While I am still a long term bull in these markets I must again say that consolidations are healthy and necessary for long term bull trends to continue. This trade is great for "hedging" other long or short trades that you have on in the metals whether they are in futures, stocks, etfs, etc.

Profit Goal
Max profit is limited to the original credit received.Max profit occurs with the Gold market expiring between the two strike prices that are sold (550-555), profit is then reduced by $100 per dollar that gold moves outside of the max profit range. Break even points at expiration are 536 and 569. This means we have a $33 range that gold can expire within that we will result in at least some kind of profit.

Risk Analysis
Max risk assuming a 140 point credit is 60 points ($600.00). This occurs at expiration with the Gold trading below 530 or above 575.

Disclaimer
Past performance is not indicative of future results. Trading futures and options is not suitable for everyone. There is a substantial risk of loss in trading futures and options.

Matt Odom is the Managing Partner and Energy Analyst and Derek Frey is Head Trader at Odom & Frey Futures & Options.