I have a trade on long PCU/short comex copper (dec 07 at this point). As I mention in the sidebar, I've hedged most of my equities with various instruments, short S&P500 futures being the easiest. I hope to keep this position on for a very long time. Let's see how it has done since the start of the credit crunch:
.................PCU.....Comex.....Dec SPZ7
July 15......112.5........3.66..........1558
Nov 15......107...........3.08..........1456
% change...-5%........-16%...........-7%
Note: PCU is dividend adjusted
So the trade has done quite well. Even unhedged, it would have made 11%, pretty good on a relative value trade. And if you hedged it that goes up to 18%!
So what to do here? I'm in a bit of a quandary: on one hand I believe that the trade will pay many times that over the next few years. Copper the metal is still way overpriced, and we are just starting to see the beginnings of new supply brought on by the price rise. Also, PCU is still a very profitable company, and is lower cost than most of its competition. OTOH, instinct tells me to take profits on a big gain like this. So I'm taking the chicken s*** way out - I'm taking a little off. Hope to put it back on if the whole stock market tanks big time.
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