Last September the IMC blog entered an unleveraged position in the platinum/gold spread at the equivalent of -$201.20 (premium gold). Leveraged was used on April 14th when the blog hypothetically bought another July-August platinum/gold spread at -$235.20 (premium gold).
The ‘add-on’ investment position was liquidated at -$291.60 (premium gold) on June 13th, resulting in a loss of -$5,640.
Furthermore, a speculative long position was also entered on the same date and at the same price. This speculative position will be liquidated on a two-day close below -$321.50 (premium gold), which could happen as early as today.
Reign of the Bear
The platinum/gold spread cracked the March 3rd record low today and the ratio of 0.75:1 is just shy of the January 20th multi-decade low of 0.74:1. Failure to bottom right around here could escort the ratio to the October 1982 record low of 0.69:1.
Furthermore, the current one year and five-month inversion could soon match the one year and seven-month inversion that occurred from September 1981 and April 1983.
Obviously, the situation in the relationship between platinum and gold is an outlier. At some point, it will end and a huge reversion to the mean will begin.
But timing is everything…especially when leveraged futures contracts are involved! This is why you need to manage your risk and position size correctly. Once the bull market is in play, it will make sense to go for the gusto and pyramid positions. Until then, concentrate on defense. You do that by using stops and keeping low/no leverage.
For tracking purposes, the blog will liquidate the long July-August platinum/gold spread investment position and simultaneously enter a long investment position in the October-December platinum/gold spread at the market-on-close on Friday, June 17th. There are currently no liquidation parameters for this low-leverage position. Factoring in the results of the recent ‘add-on’ investment position, the bankroll for this spread is now $101,920.
On the long July-August platinum/gold spread entered at -$235.20 (premium gold) on April 14th, roll to the October-December platinum/gold spread at the market-on-close on Friday, June 17th if the liquidation parameters are not triggered. Risk the October-December spread to a two-day close below -$322.00.