With gold crossing US$1,300 an ounce, gold’s seasonality (discussed in the Sept. 4th blog) has gone as expected. But unfortunately, gold stocks have not performed as we would have liked. Damaging the performance of the long call positions, although the covered call writes and cash secured puts appear to be working as we had hoped. Those who opted for the long calls should probably hold their positions for the time being. We may yet see some action on the stock front during October.

Which, by the way, leads me to another seasonal idea. October is long been known as a month of mood swings. And aggressive traders might want look at strategies that would profit from a spike in volatility.

One approach is to buy straddles on stocks that would be particularly susceptible to a mood swing. I am thinking about companies like Agrium Inc. (AGU, recent price $79.17), which rallied $3.61 on Friday.

The Agrium November 80 straddle is trading at 28.7% implied, which translates into a cost of $7.10 to buy the call and the put. This position will be profitable if Agrium closes above $87.10 or below $72.80 at the November expiration. It can also be profitable if the volatility of Agrium should expand during the month of October.

The maximum risk in this position is the $7.10 per share price of the straddle. Although it is extremely unlikely that the straddle would be worthless at expiration. For that to happen, Agrium would have to close at exactly $80 per share in November.