Gold/Crude Spread: Short Position Entered

Yellow Beats Black…For Today

The Brexit vote created chaos in every market on the planet today.  Gold was one of the safe-haven beneficiaries –it made the biggest one-day gain since the depths of the financial crisis in 2008 and traded with three times the average daily volume- and crude oil slumped.  Don’t be surprised if you turn on the radio today and hear R.E.M. blasting out It’s the End of the World As We Know It…but do be concerned if you call your broker (who actually does that anymore?) and that’s the music on hold!

December Gold Crude Oil (x3) spread 15-minute

December Gold Crude Oil (x3) spread 15-minute

The divergence between the two markets was enough to get IMC into the gold/crude (x3) spread.  The blog sold one 100 oz. December gold contract at $1,338.00 (value of $133,800) and simultaneously bought three December 1,000 barrel crude oil contracts at $49.60 (total value of $148,800).  This put the spread on at a price of -$15,000 (premium crude).  Initially, the spread will be liquidated on a two-consecutive day close above -$9,000 (premium crude).

Better strap yourself in.  We don’t know if everything will be factored into the markets by today’s close or if this is just the beginning of the next financial crisis.  We can’t control what the markets do.  However, we can control what we do.  Manage your risk wisely and focus on proper position-sizing.

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