Futures Spread Trading | Thinkorswim Relative Value Trading | S&P 500, Gold, Copper, Silver Futures

Futures Spread Trading | Thinkorswim Relative Value Trading | S&P 500, Gold, Copper, Silver Futures

Silver has been correlated closely with gold throughout time, and these correlations broke down at the end of 2019 / beginning of 2020. Silver was an easy buy. When this correlation broke down, it was an absolute no-brainer buy.

This Youtube testimonial below shows a member making $140,000 on a $40,000 account, all because of the silver trade we layed out. The reason that the trade was such a no-brainer is because these lost correlation and then silver went parabolic to catch up to gold.

Now, the reason that platinum and copper were on the week ahead post for that week is because platinum (purple line) is relatively cheap to the other metals. Copper (yellow line) as well is relatively cheap to the other metals. We like being long copper, and we like being long platinum. We like being long copper and platinum because of the correlation to the other instruments. That's it. It's nothing more complicated than that.

Managing Money: How do you get in? How do you get out?

We ladder into trades. I think it's best to ladder in in three different tranches. Throughout my career, I think that's been the most effective. Three tranches, ladder in. That's how the trade works.

If you think about any two correlated instruments, they can be anything. It could be gold and silver. It could be five-year bonds, ten-year bonds, etc.

For example, the Hog Crush and the reverse Hog Crush. Lean Hogs against corn futures against soybean meal. There are so many different spreads. This is a spread that we don't usually teach here, but it's something I've traded in the past. I'm looking at these sorts of things all day, looking for different relationships.

Now, why would the hog market be related to the corn market? Hogs eat corn. It's all tied together, so once you find correlated instruments that break down like this, there might be an opportunity to buy one and sell the other.

Now, you don't have to do a spread trade. We are not robots. My overall thesis, especially for newer traders… You don't need tactical analysis. What you need is to find a reason why something should go up or why something should go down.


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