Futures Measures

Pairs Trading: Static vs. Dynamic Deltas

Futures Measures

For today’s Futures Measures, Frank, James, and Pete discuss how we should approach both static and dynamic delta Pairs trades. More specifically they look at a common and currently viable pairs trade between gold and silver.

The gold silver ratio is currently on the upper end of its range, traders may look to sell gold and buy silver. The gold and silver futures can be traded 1 to 1 for a close IV adjusted the notional value. Interestingly we see 1 gold future to be approximately equal to 4940 shares of SLV.

Example Trade Setup:

· Long 1,000 shares of SLV

· Need 1/5 /GC Future exposure:

-Short 20 Delta Call: Aug 1290 Call for 4.40 ($430)

-33 DTE

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