Home > How To Get A 4% Risk Free Dividend From Gold: Newmont Mining Corp, SPDR Gold Trust, ProShares UltraShort Gold
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How To Get A 4% Risk Free Dividend From Gold: Newmont Mining Corp, SPDR Gold Trust, ProShares UltraShort Gold

March 6th, 2013

gold timeBillionairesPortfolio.com: Here is a neat little trick I learned from my hedge fund days, its called a paired trade or hedged trade. Right now one of the biggest and best gold mining stocks, Newmont Mining Corp (NYSE:NEM) is currently yielding 4.30%, this is a great dividend, and I have a way you can capture it without taking little or any market risk.

To do this you want to sell Gold ($GLD) and buy the gold mining Stock, Newmont Mining Corp. Why because selling gold short, via the SPDR Gold Trust (NYSEARCA:GLD) or better yet ProShares UltraShort Gold (NYSEARCA:GLL), you are taking out the market risk of gold prices going down. Also since Newmont Mining stock is a lot more volatile than Gold and the ETF $GLD, I suggest using the Proshares Ultra Short Gold ETF (NYSEARCA:GLL), which is 2x leveraged and sells Gold short.

The Proshares Ultra Short ETF ($GLL) is an inverse etf, that sells gold short at 2X leverage, it only profits when gold prices go down, so its the perfect hedging tool to use for our trade.

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So here is the trade I am using for my account: I am long 100 shares of Newmont Mining, Why? Because its the best and safest gold mining stock, with a 4.30% Dividend Yield, higher than almost any other S&P 500 company, and I am also going long 50 shares of the ETF, $GLL, The Pro Shares Ultra Short Gold ETF (its an inverse ETF that only profits when gold goes down and its leveraged 2 times).

Currently 100 shares of Newmont will cost me: $39.70 or $3970 and I am going long 56 shares of $GLL (The 2X leveraged Short Gold ETF) at $69.75 which will cost me $3970 as well. So I am equally hedged, both in dollar terms, and in volatility, since the Double Leveraged Short GOLD ETF moves in the same range as Newmont’s stock.  But remember the idea behind this trade, is that I am hedging out any risk of Gold Prices, or Gold Prices dropping, and by doing this I am collecting a huge 4.30% Dividend without having to take any market risk.

-William Meade
Editor of The Billionaires Portfolio


NYSE:GLD, NYSE:GLL


 

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  1. what?
    March 7th, 2013 at 03:10 | #1

    This doesn’t really make any sense. NEM will drop by the amount of the dividend when it goes ex-div, so it’s not like the div is free money. Plus you will then have to pay taxes on the div. Meanwhile GLL decays over time, and is not meant to be held long term. This is a losing trade all around. Good for Wall St sell side firms, bad for mom and pop.

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