johnny2vw
Long

Big Money Trade - Gold to Copper Ratio - Yes its risky!!

77 1 5
The gold-to-copper ratio is currently around 625. This is historically very high, particularly considering the stock market is close to all time highs. Copper             has not experienced much in terms of a rally like the other metals. The gold-to-copper ratio has been trending up since May, 2015 which is a very long time.

Its time for this ratio to drop meaning either copper             will increase or gold             will decrease. This ratio is not sustainable at these levels (625 area) It has topped out around the 625 area for the past week and a half and gone sideways. I am expecting this ratio to break and head lower very soon.

Here is the trade:

Short 2 GZG2016, Buy 5 HGZ2016 with the ratio between 623 - 627.

The ratio is easily calculated by dividing GZG2016/HGZ2016

Example 1357.6/2.1785 = 623.18

This is a big money trade so its not a trade you can stare at your screen and watch because the little fluctuations will drive you crazy. Its like gardening once you are in you have to let time be on your side.

Each point in the gold-to-copper ratio equals approximately $440. This trade is good for an easy 100 points meaning the gold-to-copper ratio would drop to the 525 area. This would equate to approximately a $44,000 profit.

I do not use a stop and the reason is one side or the other can get out of balance briefly.

I am in at 623, will do another at 624 and one more at 625.

Haha - no risk, no reward. Rolling the dice :)
johnny2vw
3 months ago
This trade is short gold, long copper so there is no confusion. So that both sides are approximately equal you have to short 2 gold contracts and go long 5 copper contracts. You want the gold-to-copper ratio to drop from where it is now.
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