Buy TYG 129 Calls vs HGG 2.90 Calls approx. 30 Delta switch 29 & 33 days to expiry
Sell the HGG 2.77/2.90 Risk Reversal (calls over) sell the TYG 127.50/129 Risk Reversal (puts over) with approx, 29 & 33 days to expiry. Should come for a good credit depending on your weighting rations.
This recent sudden move up in Gold may have an interesting impact on Copper & US-10 Years if you adhere to the Gundlach finding on the historic relationship between US 10-Year yields & the Copper/Gold ratio. Interestingly at the start of December Jeffrey Gundlach was suggesting US Yields would rise as Copper outpaced Gold. Gold has totally outstripped Copper since.
![](https://www.pricingmonkey.com/wp-content/uploads/2019/12/SNAG_Program-0225-1024x448.png)
Longer-term it seems that US-10 Year yield track the Copper/Gold ratio very tightly. Rising Gold relative to Copper suggests lower US Yields. Higher US Yields suggest a higher Copper vs Gold ratio.
![](https://www.pricingmonkey.com/wp-content/uploads/2019/12/SNAG_Program-0229-1024x882.png)
The Gold relationship with Copper recently (1-Year) has been negative, although very recently it’s been inline. The yellow dot shows the current point and recent dots.
![](https://www.pricingmonkey.com/wp-content/uploads/2019/12/SNAG_Program-0227-1024x456.png)
What’s the trade here?
If you believe that Gold has another price discover excursion above here, as it has a lot of cheerleaders out there, so I expect it’ll have at least have a short term spike as these players jump on board again/leverage up. Impact being that it’ll sink the Gundlach Index (it’s the divisor), suggesting potentially weaker Copper, and lower US Yields short-term.
Buy TYG 129 Calls vs HGG 2.90 Calls both with similar 30 handle deltas.
Sell the HGG 2.77/2.90 Risk Reversal (calls over) sell the TYG 127.50/129 Risk Reversal (puts over) – so you’re buying HGG Puts vs Calls, and selling TYG Puts vs Calls, 2 different market conventions here (Metals & Rates).
We used a 1000 TY Calls vs 625 HGG Calls for our weightings here
![](https://www.pricingmonkey.com/wp-content/uploads/2019/12/SNAG_Program-0232-1024x296.png)