Relative Value Trade

Long 5x Silver Micra & Short 2x Copper Mini

Big Picture

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

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

Intraday Fundamentals• China’s final HSBC Purchasing Managers Index for May released

earlier came in at 49.4, down from a preliminary estimate of 49.7, but higher then April's reading of 48.1.

• A separate report showed that activity in the country's services sector improved to a six-month high in May. Chinese non-manufacturing PMI rose to 55.5 from 54.8 in April.

• the Institute for Supply Management corrected its May manufacturing data twice on Monday. The index was first corrected to 56.0 after being initially reported as 53.2, before being corrected for a second time to 55.4.

• The upbeat data underlined the view that the U.S. economy was regaining traction after being slowed by unusually cold temperatures during the winter months.

Technical Analysis

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

• Short ratio spread is a relative trade where we speculate that copper mini futures will underperform silver micra futures

Trade Management

• I offered copper mini at 410.95 and made an bid for silver micra at average 39897, thereby completing both the legs of the inter market spread trade or relative value trade or short ratio spread trade

• I bid for copper at 410.20 and offered silver micra at average 39947.5

• Based on the prices (5*Silver Micra -2*Copper mini ) micra is 1 unit for having net exposure as close to 0 (approx. -6k exposure per unit) as possible

Intuition

• NO

Review• I did a good job waiting patiently for the trade • I should not have exited at the time I did, I somehow let some past bad

experience over rule my rules• Hourly ratios charts triggered a sell today and since the spread has been

moving lower since past couple of hours so I ended the position early believing that it was oversold.

• What I should have done is modified the ratio trade into a outright when silver gave a sell trigger on lower timeframe following the axiom cut your losses short (cutting silver), let your winners run( letting copper run).

• Even if I had not modified it I should be doing all right based on the ratios.

• I CAN IMPROVE EVERYDAY