In recent months, the exchange rate between gold and oil has experienced a very strong move, bringing the oil-gold ratio (the number of barrels of oil needed to purchase one ounce of gold) to near record highs. 2015 has seen a sharp collapse of the dollar price of oil with relative stability in the dollar price of gold, taking the oil-gold ratio to its recent highs.
Today, Tom Sosnoff and Tony Battista are joined by Pete Mulmat of the CME Group. Pete first explains how you can find determine the IV adjust ratio for the pairs trade between gold and oil. He then highlights two different trade ideas depending on if you think the spread will continue to contract or expand back to its highs. Check out the segment to find out what's driving both markets and what you can do to place a trade that will take advantage of your assumptions!
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