I made 149% this past month using the Pair-Trading Strategy explained here many times but first released back in September.

Since that article appeared in September I since made another 98% (in a one month time period) with the Pair-Trading Strategy. This time it was 149% in a month. Here is how I did it…

Back on April 5th, Gold was 1135.30 per ounce and Oil was 86.69 a barrel. The ratio on Oil to Gold is 13.09 to 1. I’ve always recommended here that when this ratio drops below 13.25 to go long on Gold and short on Oil.

To accomplish this, I bought a July Put on USO (the Oil fund) for $207 a contract. I also bought a June Call on GLD (the Gold fund) for $360 per contract. My total cost is now $207 + $360 = $567 total for one contract each.

Now the June Call is cutting it close, as an option loses it’s time value the fastest in the last month. I really need this investment to hit it’s target before mid May (which is where we are at the time of this writing, so I just made it).

The target of course is when the Oil and Gold ratio is at it’s historic average of 15.7 to 1. On May 6th, the average was 15.53 to 1, and the following day it was 16.13 to 1. May 7th was the day to close the contracts.

I closed the USO contract for $560 and the GLD contract for $850. Total coming back is $560 + $850 = $1410. Since my cost was $567 for one pair of contracts, that is a 149%
return by buying when the ratio is below 13.25 and selling when it is above 15.7.

Now how can you profit off this like I have? Well, you can wait until the ratio is below 13.25 again and do the strategy as I just did.

The other option is to wait until the ratio hits the other extreme of 18.15 and then short Gold and go long with Oil.