ASX Stock Pairs Trade Journal

[notting]

Good points, as usual, still I like the fact that miners use stuff that ABC make.

P.S. Why did ALZ trade down to $2.19 today? And why was I not looking?

Probably because I hadn't taken a positive position on against SGP which I have success with a few times!
My radar just loves mental markets. (I am mental - clearly)
The rest of the time I'm a hack and need guidance!
Thanks for the heads up however will run and have a look now!

 

[notting]

Two months ago it seems the money machine was invented!!
ASL Vs BLY.

 

[skc]

I did say I'd post some charts. These are all ratio charts with the blue line representing 40-day moving average of the ratio line.

CPA/DXS - A pretty reliable pair for some time. Heading into dividend season (most REITs go ex-div on 24 Jun) I like to trade pairs that have similar dividend yield, so there's less disadvantage in getting caught by yield chasers. CPA is ~8.5c off recent high while DXS is only 2.5c away... the profit objective for this pair would be half this range or so.


WDC/ALZ - Even though it's a trending chart it has good trading opportunities. ALZ is going ex-div along with the rest of the REITs, while WDC is on a different cycle. So there may be a little bit of advantage from that. It also wasn't that long ago (2 May) that ALZ went up to $2.87 on the back of a good corporate presentation. It looks like ALZ fell into a bit of a market depth hole this afternoon and traded as low as $2.19.... I think I was too busy eating lunch at the time ...


STO/ORG - Pretty large divergence with spread pretty much at 6-month low. Looking at individual price charts, STO yesterday fell through a small ledge resulting in a gap to be filled, while ORG remain above the ledge (~$12.60). Given the good correlation, either STO will come back (which it did today) or ORG will fall through. There were some chatters about ORG needing additional capital so the short may benefit from any weakness of the share price stemming from that.

 

[skc]

Two months ago it seems the money machine was invented!!
ASL Vs BLY.

Love this pair. Add in IMD and NWH in the mix.

 

[skc]

End of Day P&L



NB: Commission = 8bps each way. These trades use CFDs but I've ignored interest charges for the sake of laziness. Margin required is also ignored but it will only come into play when you hold too many pairs (or your position too large).

 

[skc]

Trade #3 opened - Long STO @ $11.39, Short ORG @ $12.78. Size = 15% of account for each leg.

Trade #3 closed - Sell STO @ $11.78, Cover ORG @ $12.78. Net +3.5%.

It's done half the convergence in 2 days and that's good enough in this market.

 

[skc]

Trade #4 opened - Long NWH @ $3.09, Short ASL @ $3.34. Position size 7.5% (so far).

 

[notting]

Long AMP short SUN

 

[skc]

Trade #4 opened - Long NWH @ $3.09, Short ASL @ $3.34. Position size 7.5% (so far).

Added another 2.5%. NWH @ $3.06 and ASL @ $3.30.

Average Long NWH @ $3.08, Short ASL @ $3.325.

 

[edman79]

Hi SKC,

Who are you trading with now, and what is the minimum size account you need to get a commision of 8bps?
Also (as a matter of interest) what is the short/long funding rate they are giving you?

 

[skc]

Hi SKC,

Who are you trading with now, and what is the minimum size account you need to get a commision of 8bps?
Also (as a matter of interest) what is the short/long funding rate they are giving you?

I am trading with IG markets. You will need to ask them what volume you need for 8bps. The funding rate I think is base +/- 2%. So with pairs long/short being the same size the effective funding cost for each position is 4%.

Trade #5 - Long QBE @ $12.22, short SUN @ $7.94. Size 10% of account.

 

[skc]

Trade #6 - Long CHC @ $2.23, Short WRT @ $2.80. Size = 5%

Waiting for the remaining half to be filled at $2.22 / $2.81.

 

[skc]

Trade #6 - Long CHC @ $2.23, Short WRT @ $2.80. Size = 5%

Waiting for the remaining half to be filled at $2.22 / $2.81.

Got the WRT fill at $2.81 but ended up reaching for CHC @ $2.24. So gained no advantage with my 20 minutes of patience.

So the line reads:

Trade #6 - Long CHC @ $2.235, Short WRT @ $2.805. Size = 10%

 

[skc]

Trade #7 - Long SMX @ $5, Short IRE @ $6.38. Size = 7.5%.

This is a half-size position as SMX hasn't the deepest market depth.

Long AMP short SUN

I think I like yours AMP long better than my QBE long. QBE has been unkind to me for a while...

 

[skc]

Some charts

Trade #4 - ASL/NWH. Two pretty sound mining services firm that enjoyed huge run up since Feb results, followed by massive sell off from the recent MAYham. This pair has >95% correlation while each on its own can have pretty large (5-8%+) daily swings. Profit target is for the ratio to revert to ~1 against opening ratio ~0.93.



Trade #5 - QBE/SUN. SUN has been amongst the strongest performer in financials of late although it broke support at $7.80 2 weeks ago. Today's 4.5% spike up against a flat XFJ just didn't seem right. QBE on the other hand appear to have found support above $12 at least for the time being. Profit target is ~3-4% net movement (basically for SUN to give back the spike).



Trade #6 - CHC/WRT. I haven't been able to understand why WRT (and many REITs for that matter) are trading at 52wk highs while all data indicates that property prices are falling. I know REITs offer good yield and interest rate is falling, but it just doesn't seem to make much sense. WRT is pure Australian retail which makes even less sense. Anyway, CHC going ex-div in 3 weeks and WRT is not. CHC is 10% off recent high while WRT just reached 52wk high. So plenty of opportunity for convergence. Profit target ~5%.



Trade #7 - IRE-SMX. I wrote on the IRE thread how it is a bit overvalued although historically well loved. IRE fell below support at $6.6 following the AGM so that should offer resistance even if it is to move further north. SMX on the other hand is imo a good value IT stock that's been caught up in the general sell down. If recent lows hold there is little resistance until $5.40. Profit target ~6-8%.



Note: These profit targets are based on convergence towards the mean (blue line) but I rarely wait that long if there's quick profit to be had. The blue line also moves over time and the longer a pair is open, the smaller the profit target.

 

[skc]

EOD P&L



P.S. CPA/DXS is pretty much finished but I am trying to pinch an extra pip on both legs.

 

[skc]

Trade #1 opened - Long CPA @ $0.985. Short DXS @ $0.945. Size = 15% of account for each leg.

Trade #1 closed. Sold CPA @ $1.015, covered DXS @ $0.94. P&L = 3.5%.

P.S. Managed to pinch half a cent from CPA but not from DXS.

 

[skc]

Trade #8 opened - Long AIO @ $4.36. Short QRN @ $3.49. Size = 12.5%.

 

[skc]

Trade #9 opened - Long SYD @ $2.95. Short AIX @ $2.42. Size = 15%.

 

[skc]

Trade #6 - CHC/WRT. I haven't been able to understand why WRT (and many REITs for that matter) are trading at 52wk highs while all data indicates that property prices are falling. I know REITs offer good yield and interest rate is falling, but it just doesn't seem to make much sense. WRT is pure Australian retail which makes even less sense. Anyway, CHC going ex-div in 3 weeks and WRT is not. CHC is 10% off recent high while WRT just reached 52wk high. So plenty of opportunity for convergence. Profit target ~5%.

Closed CHC @ $2.33. Waiting for a fill on WRT at $2.81. If I get these fills, trade is closed as:

Trade #6 Closed - Sold CHC @ $2.33, Covered WRT @ $2.81. P&L = 4.07%.

Achieving 80% of the profit target over 1 day is a good close.

P.S. Of course CHC has more to run as soon as I closed it... :swear: