Silver-Gold Ratio Strategy

Yes. A ratio trade requires a position in both metals - long one and short the other. This is what creates the 'ratio' exposure. You profit from how the ratio changes, not individual price moves.

If you're short ratio (short gold, long silver) and both rise, you can still profit if silver rises MORE than gold (ratio falls). However, if gold rises more than silver (ratio rises), you lose despite both rising.

Historical average is around 60. Modern ranges are typically 50-90. Below 65 suggests silver is expensive; above 85 suggests silver is cheap. These are guidelines, not precise fair values.

True extremes (ratio >100 or <50) are rare - maybe once every 5-10 years. Moderate extremes (>85 or <60) occur more often - perhaps yearly. Patience is required for best opportunities.

Partially. Since gold and silver are ~80-90% correlated, being long one and short the other reduces exposure to overall precious metal moves. However, the hedge isn't perfect, especially in crises when correlation breaks.

Decide dollar exposure per leg (e.g., $10,000). Gold: $10,000 ÷ Gold Price = Gold Oz. Silver: $10,000 ÷ Silver Price = Silver Oz. Example: Gold $2100 = 4.76 oz, Silver $28 = 357 oz.

Always ratio-based stops. Individual prices can move while ratio stays favorable. Example: Gold and silver both drop 5% = ratio unchanged. Set stop at specific ratio level (e.g., ratio 100 if entered short at 90).

CFD financing applies to both legs. For short ratio (long silver, short gold), you pay financing on long silver, receive on short gold - partial offset. Net cost depends on rates and position sizes.

When ratio moves significantly (10%+) and position becomes unbalanced. Unbalanced = directional exposure. Rebalance monthly or when imbalance exceeds 20% of one leg.

Spread betting often optimal - tax-free profits, flexible sizing. CFDs work well too. Futures (GC/SI) for larger accounts needing best pricing. Choose based on account size and expected hold time.

Calculate rolling mean and std dev (e.g., 2 years). Z = (Current Ratio - Mean) / Std Dev. Trade: Z > 2 = short ratio, Z < -2 = long ratio. Exit when Z approaches 0. More precise than simple ratio levels.

Yes. Short ratio: Buy silver calls + gold puts. Long ratio: Buy gold calls + silver puts. Defined risk = combined premium. Or use risk reversals (buy call, sell put on expected outperformer).

Cointegration means gold and silver have a stable long-term relationship - deviations are temporary and mean-reverting. Statistical tests (Engle-Granger) confirm this. If cointegrated, ratio trading has statistical edge.

High ratio + recovery starting = strong short ratio (silver benefits from growth). Low ratio + crisis starting = strong long ratio (gold benefits from fear). Macro context improves timing at extremes.

Allocate 1-5% to ratio strategy. Low correlation to equities provides diversification. Can express macro views without directional metal bets. Combine with other commodity spreads for further diversification.