zaq11qaz
Long

good pair trade

NYSE:X   UNITED STATES STL CORP NEW
35 1 3
2 months ago
I like a pair trade long x and short rock with the same dollar amount on both sides. A good entry would be
2.1 shares of x for every share of rock if you can catch the market when the prices are lined up that way.
just divide the price of rock by the price of x, and if you get anything close to 2.1, enter at the market.
as an example, you would short 100 shares of rock and buy 210 shares of x
2 months ago
Comment: so as of the close on 9/26. this trade was positive $366. today 9/27 it's going in the other direction. I decided to take profit at +$200. if both stocks pull back to the 10sma, I may reenter, or just look for a better situation
zaq11qaz
2 months ago
I would exit this trade at the market if/when the ratio hits 1.80 If my math is correct and you bought 210 X and shorted 100 ROCK, your profit should be close to $700
but obviously you can exit at any time. From the close on the 22nd to the close on the 23rd. the trade is up almost $200 but that's mostly because both sides are showing profit
and is not something that happens often.
I would also exit if the ratio exceeds 2.25 at the close of any day. That would result in a loss of about $350. SO the risk reward using those parameters is very close to 2 to 1

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