Trading Spreads This Earning Season
Sunday, May 1, 2011 at 4:51PMNo single spread trade we made this week stood out from the others so we thought we’d mention a few spreads that made large moves.
Earnings season often provides a catalyst for entering into a trade. On Tuesday II-VI Inc. ($IIVI) was up over 20% after easily beating expectations. We decided to wait until the stock stabilized before shorting it as part of a pair trade. On Friday we sold IIVI and bought Roper Industries ($ROP). By then the spread was trading lower than Tuesday’s levels, but still considerably higher than its one year average.
We typically leave positions on through earnings, and sometimes this works against us. We were long Mercury Computer Systems ($MRCY), short Stratasys ($SSYS) coming into the week. $MRCY reported disappointing results and closed Friday 8.5% below last Friday’s close. $SSYS reports next week. Another potential catalyst.
$GLD-$GDX has been interesting lately, to put it mildly. We sold the spread on Monday, and averaged down on Wednesday. The spread closed Friday at close to its highs for the week despite $GLD being up almost 4% for the week, which would have typically translated to an even bigger move in $GDX.
Written by Norm Winer. Follow me on Twitter and StockTwits.
Reader Comments (1)
Definetly hear ya on GLD/GDX. Looking at quite an extreme right now. I've been using ratio of 1GLD-2.308GDX the ratio is at the highest its been in a very long time...