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Given an opinion that the demand for HG (copper) is strong, and that a
particular "nobody" (junior) mining company with significant copper reserves
could cashflow positive in 2004, I'm considering a strategy to sell HG and
buy TKOCF.OB. My assumption is that the volatility of the latter will rise.
Here's my math:
HG(notional) * (TKOCF.OB(volatility)/HG(volatility)) / TKOCF.OB(close) =
number of shares to buy against one sold HG contract. Vola regression is 30
days.
As of 3/29/04, I'd be.
25000*(.84/.42) / 1.84 = 27,200 shares (rounded up)
I'd be short HG1600 @ 135.80 and long TKOCF.OB @ 1.84
Appreciate any comments. Don't know much about copper!
Thanks in advance
Colin West
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