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kalasend

Registered: Dec 2010
Posts: 21

08-10-11 08:12 PM

I'm toying with such idea to trade the collapse of gold price with respect to platinum.
From this picture it seems historically gold price cannot exceed platinum for long:

I will be using PTM, GLD and GLD option in this trade:

-10 * GLD@172.72 (margin required = 519)
83 * PTM@20.63 (margin required = 429)
1 * GLD 225 2011-11-18 Call @1.21 (delta = 0.10, no margin required)

The call is merely there to hedge gold's continuous up in the near term, which may require rolling into another option.

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antaram

Registered: Apr 2011
Posts: 79

08-10-11 08:44 PM

good luck, may i ask why not use PPLT instead of PTM, i'm considering a similar trade

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kalasend

Registered: Dec 2010
Posts: 21

08-11-11 04:28 AM

One significant thing to note, however, is that there's no option for the physical ETN's. So hedging becomes challenging.

Are you saying that there's no need to keep paper-to-paper(i.e PTM vs. GLD) or physical-to-physical (PPLT vs. PHYS) pairings? Well, I can't think of the pro's and con's at the moment, except that I would want to short GLD, for simpler hedging.

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fickletrader

Registered: Jul 2006
Posts: 245

08-11-11 04:39 AM

I wouldn't use options for this. You're better off buying the physical coins for such a strategy. The ratio has stayed below 1 for a really long time in the early 1980's. It got below 0.8 in fact!

Here's a chart from "Historical Charts of Interest":

Platinum to Gold ratio

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kalasend

Registered: Dec 2010
Posts: 21

08-12-11 08:07 PM

Quote from fickletrader:

I wouldn't use options for this. You're better off buying the physical coins for such a strategy. The ratio has stayed below 1 for a really long time in the early 1980's. It got below 0.8 in fact!

Here's a chart from "Historical Charts of Interest":

Platinum to Gold ratio

I doubt if I should feel pessimistic with that chart. First, it shows that for most of the time, platinum is way higher than gold price. The fact that it deeps below gold during the early 80's is probably because of the reduction in industrial use(notoriously in catalytic converters) during recession.

But thanks to you though for pointing out that Pt CAN stay below Au for extended period. So I agree that holding physical Pt is a good way because it at least eliminate the fees and -ve roll yields that's associated with ETFs and futures. To that end, I just shifted to holding PPLT and may consider getting coins instead (though I doubt the premium for phys is too high to make sense compared to holding PPLT)

In addition I think using GLD as the leg for shorting Au is appropriate because:
1. Being in paper, GLD naturally carries some counter party risk
2. Seeing what happened to silver when a paper metal go parabolic up and then got crushed by margin increase
3. Available option trading for hedging its continuous up against Pt

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kalasend

Registered: Dec 2010
Posts: 21

08-12-11 09:16 PM

I decided to use PPLT instead of PTM as the leg for long platinum.

sold 83 of PTM @ 20.95 (realized = 26)
bot 10 of PPLT @ 177.38

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