Relative Value Trade

Long 2x Copper Mini & Short 5x Silver Micra

Big Picture

• Silver Micra has below average volatilitythereby making the condition of the market a“quiet downtrend”

• Copper Mini has below average volatilitythereby making the condition of the market a“quiet sideways”

Intraday Fundamentals

• Copper prices have been well-supported in recent weeks amid indications the U.S. economy

• Speculation demand from top consumer China will increase in the near-term for Copper.

• Data released earlier showed that the U.S. economy contracted for the first time since 2011 in the first three months of the year.

Technical Analysis

• The Ratio spread plotted between Copper mini & Silver micra suggests we should establish long ratio spread positions or none at all.

• Long ratio spread is a relative trade where we speculate that copper mini futures will perform relatively stronger to silver micrafutures

Trade Management

• I bid for copper mini at 411.25 and made an offer for silver micra at average 40050, thereby completing both the legs of the inter market spread trade or relative value trade or long ratio spread trade

• I hit the offered copper at 412.45 and bid silver micra at average 40050

• Based on the prices 2xCopper mini & 5xSilver micra is 1 unit for having net exposure as close to 0 (approx-5.5k exposure per unit) as possible

Intuition

• NO

Review

• I did a good job waiting patiently for the trade

• I exited the trade early to make early cash flow to close the day net positive as the connection server of my broker is undergoing maintenance thereby causing multiple outages to my trading platform so I decided it was safer taking home the ca$h rather than risk another outage of my trading platform.

• I need to develop a way to monitor the spread in a dynamic way rather than my current static ratios.

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