(Ed Note: Selling puts is one of Michael Campbell’s favorite strategies. Dennis Gartman’s comments below)

It’s one of the most valuable and most actively traded assets on the planet.

It boasts great intraday trading ranges, with tons of liquidity, which makes it easy to enter and exit and very fair prices.

And with the stock market’s recent jump in volatility and sharp declines, it’s the asset of choice for many people seeking some shelter from the storm.

I am, of course, talking about gold.

And the question I’m going to address today is simply this: What’s the best way for you to invest in it?

Why You Need Gold in Your Portfolio

Since the stock market hit an 18-month high back in April, it’s trended lower. And on several days, we’ve seen all-out chaos and panic – for example, when the “flash crash” sent the Dow tumbling by 1,000 points in just a few minutes.

As the market has stumbled through the spring and summer, gold has moved higher, as investors hunt for protection from the volatility.

Gold should make up a part of your portfolio anyway, but with the market’s erratic behavior expected to continue, it’s even more important to have exposure to some gold.

One of the best ways to achieve that is by selling naked put options. Sounds sexy – and it is!

Buy Gold for $100

Now that we’ve decided to add gold to our portfolio, how about we decide the price at which we’d like to buy it? Not only that, how about we grab some instant cash from the deal, too?

Sounds like a no-brainer, right?

Even better… with gold having pulled back by about $60 per ounce over the past few days, this dip could represent an excellent time to buy.

Okay, so our first job is to decide what level we’re interested in buying gold. Then we just need to sell put options at the corresponding price (known as the “strike price”).

To make life easy, we’ll concentrate on the exchange-traded fund that tracks the price of gold futures contracts on the COMEX in New York – the SPDR Gold Trust (NYSE: GLD). One of the other benefits that GLD has is that it trades at about one-tenth the size of the underlying futures contract, making it viable for many smaller, everyday investors.

As an ETF, GLD, trades just like a regular stock on the NYSE. It’s currently trading for about $116.50 per share and when it comes to picking the price you want to pay for it, there are plenty of choices available.

For example, you could base it on the 200-day moving average line, which shows support at $110. That would be a nice $6.50 discount. But what if you want to go even lower and buy at $100 per share?

In this case, we could sell the December 2010 GLD $100 put options for about $2 per contract. Because there are 100 shares in each contract, we’d get an instant $200 for making the trade, based on selling one contract (100 shares). If you feel like buying 1,000 GLD shares, you could sell 10 option contracts, dumping a quick $2,000 into your account.

So what does that do for us?

Get Gold At the Price You Want… And Get Cash, Too

Simply put, it means we’re now obligated to buy GLD for $100 if it drops to that price by expiration in December. And for that obligation, we collect cash.

Sounds like free money, right? Well, it is – as long as you’re comfortable buying the corresponding number of GLD shares at your chosen level. So with GLD currently at $116.50, you’d be contracting yourself to buy it at $100 – a $16.50 per share discount.

What’s the catch? Not much, except that the price of GLD could drop lower than $100 per share after we’ve obligated ourselves to buy it at $100. But that’s the risk with any investment – the price can go lower.

However, if you’re comfortable buying GLD for $100 and know how to manage a stock position, then it could be worth your while to have someone give you instant money in return for having the chance to buy a stock at a much cheaper level than its current price.

Your Six-Step Put-Selling Checklist

Before you execute a put-sell trade like the one above, you need to be aware of a few important things…

1. You’re selling put options as the initial transaction, not buying them.
2. For the duration of the trade, your broker will ask you to keep a portion of the total cost for the shares available, in case you’re obligated to buy them. As such, your options trading account will need to have margin capabilities.
3. Whatever strike price you sell put options for, that will be your maximum profit potential at first.
4. In order to actually purchase the underlying shares at your chosen price, the stock must close below that level on expiration day. So in our GLD example, the stock must close below $100 per share on expiration day in order to receive your shares. And you must have the cash to pay for the shares in full at that time.
5. If the stock you choose closes above your strike price level on expiration day, you don’t get to buy the shares. But you do keep the initial cash you received. At that point, the trade expires.
6. Remember that whatever stock you choose can drop below the price at which you buy it, so make sure you have a risk management plan in place. In addition, you can always buy back the options you sold before expiration if you want to lock in a profit.

In terms of receiving passive income, selling put option contracts can be a great way to generate income throughout the year.

When you sell at levels significantly lower than the current price of your chosen stock, the chances are high that you won’t have to buy the stock. In fact, up to 90% of the time, the options simply expire. So while this means you won’t get to buy the stock at your desired price, you do get to keep the cash over and over again.

If you like the idea of pocketing cash in return for the chance to buy the stocks you want at the prices you want, I’ve got an entire trading service devoted exclusively to the strategy. It’s called The Instant Money Trader and in it, I’ll show you exactly what stocks and options to play so you can grab the maximum reward for the smallest risk.

And I’m proud to say that since I started the service back in November 2008, it’s notched up a win rate of over 90%. For more information on The Instant Money Trader, take a look at this report.

Good investing,

Lee Lowell – Investment U

Gartman: Gold Can Go Parabolic

(advance to the 2:20 mark for Gartman’s comments, For a Trial Subscription go to The Gartman Letter)

MONDAY, JUNE 28, 2010

Gartman: I don’t get the sense that the public is terribly involved.

CNBC anchor: Wait you don’t think the public is involved in the gold trade Dennis?

Gartman: No, not much at all actually

CNBC anchor: But the holdings for GLD are at record highs

Gartman: I understand but you look at who holds the ETF, it’s not the public. I’m impressed by the institutional demand that has gone to the ETF. I’m certain the public is there. But this is not one-sided. This is not panic. This is not the kind of frenzy that we had in the gold market in the early 1980’s. This is not the kind of panic frenzy that the public got involved in in tech stocks in the early part of this century…this is different.

Silence.

Lee Lowell, long with Karim, Lee is one of America’s leading options professionals. Over the course of a distinguished career, which includes six years in the options “trenches” as a market maker on the floor of the New York Mercantile Exchange (NYMEX), he has developed a proprietary trading method capable of enormous upside while actually reducing risk. Lee’s been actively trading since leaving the floor in 1998. He’s perhaps best known for bestselling book Get Rich With Options: Four Writing Strategies Straight From the Exchange Floor. Lee is also the Futures and Commodity Specialist for The White Cap Research Group.

“Much has been speculated and discussed about the possibility of a permanent moratorium on offshore oil drilling in U.S. coastal waters in the wake of the Deepwater Horizon leak, what’s shaping up to be perhaps the worst oil disaster in world history…
Some call it the beginning of an American “green oil” or “dry oil” movement.
But rhetoric and policy debates and judge’s rulings aside, whether that happens or not is completely irrelevant to the possibility of future catastrophic oil spills in the Gulf.
That’s because the U.S. isn’t the only nation that can drill for oil there.“

….read more of The ONLY Good Thing about the BP Spill

Gold — “gold may be ready to correct. If gold can hold above 1000 or preferably above 1200, it will be impressive” – written July 5th by Richard Russell

Got Gold Report – Euro Shorts Cover, Silver Lame

We have been on the sidelines for a while now waiting for gold and silver to correct in summer thin trading, as it usually does this time of year.  It took a little longer than we thought it might, but gold finally balked as the third quarter got underway. There were actually a number of harsh reversals happening simultaneously, so gold investors shouldn’t feel alone.

….read more of the Got Gold Report

This Excerpt below from:

The New Civil Wars Within The West

The United States of America 

Virtually every conscious step of the Administration of Pres. Barack Obama and the overwhelming Democratic Party majority in Congress has been to increase the size and role of government in the economy and society, and to decrease, limit, and control the position of private enterprise and capital formation.  Given that this progressively contracts and ultimately eliminates production, and reduces the inherent asset base of the country — its raw materials and productive intellect — to a null value, the tradable value of the US currency will inevitably decline. We cannot be swayed by the enormous wealth of the North American continent.  Almost all areas have an inherent wealth of some kind, but assets left idle in the ground or infertile in the brain define countries which fail, or are not victorious in their quest for unbridled sovereignty. 

Thus, a decline in currency value is exacerbated, or accelerated, by the increasing supply of money, inextricably depreciating its value, particularly at a time of decreasing productivity in vital perishable and non-perishable output. 

The US Obama Administration has focused entirely on an agenda of expanding government — the seizure of the envied (and often ephemeral) “wealth” of the producers — without addressing the process of facilitating the production of essential commodities and goods.  Even the USSR and the People’s Republic of China, during their communist periods, focused — albeit badly — on the production of goods and services, when they realized that the “wealth” to be “redistributed” existed only as the result of production and innovation.  The US, meanwhile, heavily as a result of policies of the former Clinton Administration, has “outsourced” production, and the State — that is, the Government — cannot easily, in the US, become the producer. 

Pres. Obama has addressed the US’ economic crisis by expanding government, and government-related, employment in non-productive sectors, while at the same time blaming and punishing the private sector for all of the US’ ills.  Empowered by the extended franchise, this was the politics of envy now becoming enabled. 

Moreover, the populist, short-term response to the major oil-spill in the Gulf of Mexico was clearly geared toward (a) transforming a crisis into an opportunity to pursue a green energy agenda by highlighting the evils of the fossil fuels on which the US remains dependent; (b) ensuring that the President was not blamed for the poor crisis response; and (c) ensuring that the Democratic Party did not suffer from the crisis in the November 2010 mid-term Congressional elections. 

The result of all the Obama initiatives has been to expand government and reduce or absolutely control and tax the private sector, even though, without the private sector, the US has no viable export or self-sustaining capability. The net effect has been to mirror — and overtake — the situation in which, for example, Germany found itself a decade ago: without the ability to retain capital investment or attract new capital investment.

And in order to restrain capital flight from the US, the Obama Administration seeks to further control worldwide earnings of US corporations and citizens. For other reasons, the US, believing that it still dominates the technology arena, has imposed greater and greater restrictions on international exports of technology through its ITAR (International Traffic in Arms Regulations) and the Foreign Corrupt Practices Act. 

All of this conspires to limit investment in US manufacturing and restrict foreign interest in US exports because the regulations are being enforced merely for political punitive reasons. The US is making itself increasingly unappealing to foreign investors and has, as this writer has noted, made the appeal of the US dollar as the global reserve currency evaporate, saved, for the moment, only by the lack of a ready alternative. That situation will change within a very few years. 

Thus, the US has, in the space of a couple of years: (i) so dramatically inflated money supply that the value of the dollar is only shored up by the lack of international alternative currencies to act as reserve trading currencies; (ii) so dramatically inflated public debt, without stimulating economic growth, that US economic performance will continue to decline on a national and a per capita basis while competitive economies, such as the PRC and Russia, will grow, reducing strategic differentials; (iii) severely punished the private sector, thereby reducing the opportunities and incentives for strategic capital formation, and in particular punishing the industrial production and energy sectors, almost ensuring major dislocation to the delivery of US basic needs in the near-term; and (iv) so blatantly reduced its strategic capabilities through all of these actions and in its diplomatic and military posture as to guarantee a reduction in US strategic credibility. Concurrent with all of this is an increasingly punitive taxation framework. 

The near-term impact will include rising domestic energy prices, possibly even before the November 2010 mid-term Congressional elections, which could result in the Democratic Party losing its substantial majority in both Houses.  Even on this matter, Democratic Party ideologues have attempted to suggest that this is exactly what the country needs: expensive energy in order to facilitate change to “green” solutions. This defies the historical reality that pre-eminent powers must always have vast energy surpluses and use. 

So much damage has been done to the US strategic posture in just two years (although building on a base of inefficiencies which have been growing since the end of the Cold War), in many respects equal to the 1917 Russian Revolution (but without the bloodshed), that it is difficult to forecast whether — because of a changing global environment — the US can, within a decade or two, recover its strategic authority and leadership.

Domestically, the massively statist and interventionist approaches of the Obama Administration have polarized the country, and the response will be reactive rather than innovative, inducing a period of isolation and nationalism, but with grave difficulty in rebuilding confidence from the international investment community.

….read about Europe and other Western Countries HERE