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Thread: Gold, place your bets!

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  1. #9
    Milton Kuo is online now iTulip Ambassador, iTulip Select Premium Member
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    Default Re: Gold, place your bets!

    Quote Originally Posted by touchring View Post
    The problem is that both gold and silver might continue going up.
    If silver goes up at a percentage basis at a faster rate than gold, the trade would be profitable. I'm not saying that the trade is guaranteed to work. I'm saying that for those who believe that the gold/silver price ratio is out of whack and that they believe some reversion to historical norm is going to occur, a paired trade is one possible way to make money on that.

    The paired trade will only work if the gold/silver price ratio declines. This can occur if one of the following occurs:

    1. Gold falls in price while silver rises in price
    2. Gold rises in price but silver rises in price at a greater percentage
    3. Gold falls in price and silver also falls in price. However, gold falls at a greater percentage than silver

    The only ways to lose money on the trade are if 1) gold rises in price and silver falls in price or 2) gold and silver both rise or fall the same percentage in price. Depending on how one constructs the trade, there may also be a time element involved so timing may also be a factor.
    Last edited by Milton Kuo; 06-20-19 at 02:05 PM.

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