"FED-PIG" PLAY - Metal Strangle - Long Palladium, Silver Hedge
Palladium is one of the most interesting niche long ideas that I've been following for some time. This rare metal has appreciated 3-4x in a very short period of time. That is pretty wild, given that it is a commodity that has always existed on Earth. While there are certainly gov't related supply controls, demand is skyrocketing due to its extremely limited availability and its rare chemical properties used to manufacture vehicles in the aerospace/automobile industries.
In fact, there seems to be some slight correlation between Tesla's share price and palladium's p/oz. Might just be a coincidence though.
In any case, the FED is likely to drop rates in order to keep in line with their efforts to push the market higher. Any sort of dovishness will be bad for everyone, unless you are somehow still holding a short position from 3 months ago. Otherwise, I think these FED minutes will serve as another catalyst and that it actually has not been fully priced in to the equities markets.
However, one way to play this is to strangle commodities to account for an ambiguous reaction to interest rate guidance. All else equal, silver is the obvious pick to short and gold, long. However, I think palladium can benefit more than gold from decreased rates because it is overlooked. Gold may have already priced the best case scenario in already, which is a fair assumption given recent institutional interest.
Thus, one creative play before 2 pm is to long Palladium forward contracts for next month and buy offsetting puts on silver miner ETFs.
Will be a fully fed pig by end of day, that I am sure of.
PALLADIUM
GOLD
SILVER
In fact, there seems to be some slight correlation between Tesla's share price and palladium's p/oz. Might just be a coincidence though.
In any case, the FED is likely to drop rates in order to keep in line with their efforts to push the market higher. Any sort of dovishness will be bad for everyone, unless you are somehow still holding a short position from 3 months ago. Otherwise, I think these FED minutes will serve as another catalyst and that it actually has not been fully priced in to the equities markets.
However, one way to play this is to strangle commodities to account for an ambiguous reaction to interest rate guidance. All else equal, silver is the obvious pick to short and gold, long. However, I think palladium can benefit more than gold from decreased rates because it is overlooked. Gold may have already priced the best case scenario in already, which is a fair assumption given recent institutional interest.
Thus, one creative play before 2 pm is to long Palladium forward contracts for next month and buy offsetting puts on silver miner ETFs.
Will be a fully fed pig by end of day, that I am sure of.
PALLADIUM
GOLD
SILVER
Trade closed: target reached:
Wedge is about to crack one way or another on Palladium. Strangle or Bullish-biased straddle will both work here. Timing the breakout in either direction of something like this can lead to a very nice bottom snipe for months to come. Strongly advise taking an approach tomorrow if you ever plan to.
Since it is the ideal time to take such a strategy, am going to close this out. Best of luck.
Since it is the ideal time to take such a strategy, am going to close this out. Best of luck.