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GOLD vs PLATINUM Short/Long Futures Arbitrage

eröffnet am: 09.03.12 17:17 von: Hornissen
neuester Beitrag: 25.04.21 13:22 von: Sarahxnpsa
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09.03.12 17:17 #1  Hornissen
GOLD vs PLATINUM Short/Long Futures Arbitrage
As of late Platinum is cheaper than Gold by $150 or 10%, Gold is $1661 and Platinum is $1511. This never happened before and will never happen again, this is a historical­ moment and some people are writing it for you. You either be part of it or be a silent witness of it how some traders are going to make 500% without risking a dime, while majority are going to lose everything­ to the last penny. It doesn't matter what the price of gold will be in few years, this trade is leveraged to the minimum while it pays to the maximum. In this trade you don't have to know what is the price of Gold, news really nothing. You don't care, all you have to know is the price difference­ between Gold and Platinum, once it gets back to normal just relax and watch your account booming. Be it recession,­ bull market, elections,­ high unemployme­nt...from today you are outsider on Wall Street, because you are going to make more money than all the traders you know over the same time and the best of this trade is that you can't lose over time, you risk nothing to get everything­. Platinum is much more rare than Gold and was always more expensive than Gold but today some trading desk decided to change the things that they have no control over. The lower the Platinum will be compared to Gold the more it will be bought by physical buyers, the more they take out of the market the more it will rise later compared to Gold. Also big precious metals traders will do the same, buy Platinum/s­ell Gold against it. But the Platinum they buy and if it will be still lower than Gold, they will leave their short Gold position and roll it over, but Platinum they will ask to be delivered.­ I can imagine what this action can create over a medium term, it will explode the price of Platinum no matter how much the Gold will be by then because there will be shortage in the market if Platinum will stay lower than Gold, this small shortage of Platinum in the market will be enough to make you rich very fast. Look how it works, the Platinum is always more expensive by Gold, in the charts below you can see extreme level when Platinum was more expensive than Gold by $1250/oz but if you look at the average you will see that a gap of $250-500 is a more normal as it holds for much longer time, in fact it stays like this for years, even decades. If you like what you see and want to participat­e in this Klondike crazy, this is what you have to do.
Sell 1 Gold April 2012/ buy 2 Platinum April 2012 (you can use also more close to expiration­ months but then you will have to roll over and pay commission­ and exchange fees each time you move to the next expiration­, for big orders I advise to use longer expiration­s, because there is no contango difference­ in later months from spot and contango difference­ for Platinum/G­old is minimal, saving on commission­s and fees can't hurt nobody, in the end it all adds to the bottom line)
Why 2 Platinum futures and only 1 Gold? Because Gold futures size is 100 oz. and Platinum is 50 oz. and their price is similar and you want to make money from arbitrage,­ then your money value must be the same for both metals. Here we go, $1511 Platinum price X 50oz. X 2 = $151,100 long of Platinum, $1661 Gold  price­ X 100oz. = $166,100 short of Gold. Now the margins, for Gold futures it's $10,000 overnight,­ for Platinum it's $6000 but because this is long/short­ trade in the identical group of metals your broker if he/she is a normal person will not ask you for more than $8000, because you don't have only one way exposure to the metals market, you trade their correlatio­n. You may also leave $10,000 margin for 1 long/short­ trade (long 2 Platinum/s­hort 1 Gold) described above, once the market will get back to normal and difference­ again will be in favor of Platinum will be higher than gold by $250 your profit will be $25,000, if $500 then $50,000 etc. This is 500% profit without trying to predict the next price for Gold, be it $6000 or $600 you are going to make this money anyway. Then again, if you think you are better off guessing the price of Gold then this strategy is not for you.
Anybody who will make this trade will make more money than anybody else who will try to get the Gold price right, in my trade there is no trend, no prediction­s, no bullshit. This is pure hedge style trade, I do it the way hedge funds were intended to be.

P.S. Now regarding the same trade using ETN's, is it possible to take the same exposure to Gold vs. Platinum with funds? Yes, it is. Here how it will look:
Long $100,000 either (PTM) or (PGM) or mix of both, short $100,000 (GLD) or any other Gold ETF tracker with physical holdings, high liquidity.­ On the bottom of the page after futures graph, you will see such graph for stocks traders who don't have futures account, so I show there this ETF's correlatio­n for Gold vs. Platinum. But please understand­ that ETF is not the same as futures trading, this can be clearly seen in ETF chart on the bottom.  

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