Lanmar

Pair Trade: STAY LONG GOLD/SHORT GOLD MINERS

AMEX:GDX   VANECK VECTORS GOLD MINERS ETF
Whether you're interested in hedging your long gold             position or simply want to take advantage of a potential decline in the gold             miners, the gold             miners present an appealing opportunity in capturing alpha.
kosai19 PRO
10 months ago
Nice gold chart. I wasn't sure why you'd short gold miners when gold was clearly bullish (since they are so closely correlated). Once gold reaches your target then the gold miners should be a great short I think.
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Lanmar PRO kosai19
10 months ago
It's basically a hedge spread bet. Notice for the chart on the right there was a broken head and shoulders. I trade the chart. The chart represented (at the time) that gold miners would decline or rise with less velocity than gold. Here is the spread between gold and gold miners. Notice, had you been long gold and short gold miners with an equivalent dollar amount you would be profitable.

Gold against gold miners:
snapshot
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Lanmar PRO Lanmar
10 months ago
You'd make more than 400% on your money since 2007 with this bet.
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kosai19 PRO Lanmar
10 months ago
Oh... I see your logic now. Thanks for explaining =)
I've never really understood hedging with opposite trades though. That part is very confusing to me.
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Lanmar PRO kosai19
10 months ago
If you fall in mud with a banana in one pocket and an apple in the other, the banana will be okay but apple will not. If you're stranded on an island the banana will spoil quickly, while the apple will last longer. Both fruit, different environments. Gold miners are suffering longer term during price depreciation because of the leverage involved in exploration and borrowing costs. In an environment in which gold rises steadily and is in a long term bull trend, gold miners will do better than gold.
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