Pair Trade Ideas

What is the premise for the first one? Buy gaming slots / technology and short overbought casino's?

Harry, I'm on board with this trade if you promise to give a heads up for the exit.

Vic, the premise here is that I'm seeking companies in the same, or closely related industry that have some sort of price movement relationship. I'm going to try to embed the graphic:



If that doesn't work, maybe this link will:

http://i573.pho​tobucket.com/alb​ums/ss175/kenadl​er71/byiwynn.png

Hopefully you can see this relationship illustrated. This is mostly a TA trade.

For the record, I am in both of these trades and here are my entry points:

BYI: $38.68 (long)
WYNN: $74.50 (short)

WEC: $45.47 (long)
KEP: $15.16 (short)

At the moment, on the 3 of the 4 I am down almost 1%. On WYNN, I'm up over 4.5% which means that for right now, I'm actually slightly net positive. The futures are look like we might have a down day, so the idea here is we'd like to see the shorts fall hard from their overbought positions. Most likely on a hard day down, the longs will also fall in price. The goal is to pick shorts that fall more than their counter part so there will be a net gain with reduced volatility.

In the end, most of the time a successful pair trade will have a winner and a loser, with the winner providing a larger gain than the loser lost. It's rare that both positions can be winners, but it certainly can happen.

KanGuru: I will post here when I exit the pair trades. You may also view the relationship yourself at stockcharts.com.

Where it asked for the symbol, type in:

BYI:WYNN

or

WEC:KEP

A relational chart will then be drawn. In this way you can follow along to get a visual of how the trades are progressing.

As promised - I'm updating this trade.

The BYI:WYNN trade has worked out beautifully. Sell BYI and buy to cover WYNN for a profit on both legs!

Made 8.6% on the WYNN short, and 5.2% on BYI. The blended net return: about 6.8%, in 10 days.

Nice trade!!

Thanks.... I'll post more like this as the arise. I'm in the process of building a favorites list so that I can easily go through the graphs on a daily basis and cherry pair trades that I think are about to turn the corner and give some profits......

Shame I can't trade them here due to not being able to short.......

OK new pair trade:

Buy: MHK
Short: OC

DirtyHarry,

What are your thoughts on MHK and OC?

As I mentioned, these are mainly TA trades. Here is a composite, comparative graph:



Or here:

http://s5​73.photobu​cket.com/a​lbums/ss175​/kenadler7​1/?action=v​iew¤​t=mhkoc.png

The idea here is find two companies in the same or similar industry that are at or near technical opposites. This should allow the short position to perform very well in a down market (outperforming the drop of the long position which acts as a counter balance). In a rising market, the long position should outperform the short position rising, if it does rise against the trade.

These are short term swing trades that are designed to take advantage of arbitrage opportunities and disparities in stock prices among similar companies. They are not always low volatility, but hopefully they provide a little more stability than just going long or short. They should always be balanced, putting an equal amount of funds into each leg of the trade (ie, $10,000 long MHK, $10,000 short OC). This helps create a more neutral position so money can be made whether the market goes up or down, or even stays flat.

Thanks DH

MHK:OC is off to a great start!

Here are three new pair trades that may be executed at the market, right now:

Buy: AME
Short: CBE

Buy: EXPD
Short: CHRW

Buy: WM
Short: SRCL

Another pair trade for today:

Buy: TTM
Short: OSK

Not sure why the letter "S" keeps getting cut off on the word "Short".......