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      Market Data provided by CME Group & powered by dxFeed Technology. Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.
      Options Jive

      Pairs Trading Gold/Silver

      Oct 26, 2015

      This segment is about pairs trading Gold versus Silver and how to use the Gold and Silver ETFs to do this for those who can't or won't trade futures. All traders can learn something from this segment.

      When we look for a pairs trade we seek out instruments with high positive or negative correlations. Gold and Silver are highly correlated and often traded as a pair. A graph was displayed of the price of Gold (/GC) versus the price of Silver (/SI) from 2006 to present. The correlation even shows up in inter-day trading. A table was displayed of the 1 month, 3 month, 6 month and 1 year inter-day correlations between Gold and Silver.

      Next explained was how to find the ratio. A graph of the Gold /Silver Ratio (basis graph) from 2008 to present was then displayed.

      Examples of ways to trade Gold and Silver was displayed. The examples included Gold Futures (/GC). the Gold ETF (GLD), Silver Futures (/SI) and the Silver ETF (SLV). The example showed the ounces, ounces per share, contract value, shares value.

      A table was displayed of both the advantages and disadvantages of trading Gold and Silver ETFs. The table included smaller notional value, the effect of drag, expense ratios, liquidity issue and margin levels.

      A graph was displayed of the implied volatility (IV) of both Gold and Silver from 2011 to present. A Trade Ratio between GLD (Gold ETF) and SLV (Silver ETF) was displayed. The ratio showed the ETF, current price, notional value, current implied volatility (IV), IV adjusted and trade ratio of GLD to SLV.

      Watch this segment of “Options Jive” with Tom Sosnoff and Tony Battista for the takeaways and to learn all about pairs trading Gold and Silver, their correlations, trade ratio and implied volatility differences.

      This video and its content are provided solely by tastylive, Inc. (“tastylive”) and are for informational and educational purposes only. tastylive was previously known as tastytrade, Inc. (“tastytrade”). This video and its content were created prior to the legal name change of tastylive. As a result, this video may reference tastytrade, its prior legal name.

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