timwest
Long

Newmont Mining NEM to play catch up to the GDX Group

NYSE:NEM   NEWMONT MINING CORP
487 10 13
Risk 3% on the pair.

Target 10% return.

If the spread closes then the maximum gain is 21%.

The next step is to plot the ratio graph of these two (NEM/GDX) and make sure that is turning up.

I like the way NEM             is acting here relative to the group and to the stock market .

Go long NEM             and go short GDX             . The profit is in the performance difference between the two. You only make money if NEM             moves up more than GDX             . The key is to put equal dollars into this trade.

Cheers.

Tim 11:32AM EST, Tuesday, March 4, 2014

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Note: Orange bars are down bars (lower low, lower high). Purple bars are up bars (higher high, higher low). Green bars are either inside or outside bars. Inside bar (lower high, higher low). Outside bar (higher high, lower low). Green bars are indecisive bars and purple & orange bars are decisive bars.
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Hello Tim! Do you know the reason why Newmont lagged and didn't move higher with the sector? Looking back I see a perfect correlation. What heppened last weeks? Earnings report?
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timwest PRO vlad.adrian
Earnings report and dividend cut. Downgrades. New 3-year outlook may have been softer than expectations.

http://www.newmont.com/our-investors/press-releases

http://newmont.q4web.com/Press-Releases/News-Release/2014/Newmont-Announces-Fourth-Quarter-and-Full-Year-2013-Financial-and-Operating-Results-and-Provides-Three-Year-Outlook/default.aspx
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Wow, great find Tim, thank you!
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Hi, I am new at this, Just a recent commerce high school student. Can you give me a link to a page where it explain the chart better or u explain it to me.
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timwest PRO FastLearner
Hello FastLearner - Research online for Pairs Trading and you'll see plenty of books and texts to refer to. Essentially you just watch two similar and linked markets and then wait for one of the two to diverge from the other. Once the divergence gets wide enough a trading opportunity presents itself. This way you take out the "market risk" and boil it down to "individual stock risk relative to the sector risk". So, it is a way of reducing one level of risk in trading. It is more commission intensive and you have to watch more positions, but over time you can track this method of trading and see if it fits your psyche.
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There's a lot of pairs trades opportunities in the miner and metals sector as of recently. This was a lot of potential in the GDX/SLV pair, as well as pair price reversion between miners themselves that have years of pair price reversion, for example, NEM-ABX. This pair has offered great returns via short inflated premium in NEM on the put side and long cheap premium in ABX on the put side. For the 5 years, the average pair price of NEM-ABX has been around 11 and always seem to bounce around -2 to 2 dollar range back to the 11 dollar pair price range. The opportunities in are endless with everything still so out of whack in this industry from the precipitous and worst year for gold in years.
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This trade is working out great. Did anyone join me in this trade?
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nathanielT timwest
It was a great time to play this pair. However, I was in NEM-ABX via credit put and debit put spreads respectively, so very similar, but the NEM-ABX out performed the GDX spread.
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NEM-GDX is back to a wide spread again after almost completely closing at the end of April for a huge return. 7/22/2014
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