Wednesday, October 28, 2009

Time to Add Capital to Regency Centers (REG) Pair Trade

The other big pair trade (besides GGC/OLN) that I am doing right now is the short REG, long REG-E trade.

This trade has been cleaning up too: REG is down 10.8% and REG-E is up 5.8% (chart). The spread really widened the past few days.

I am planning to add more capital to this trade, so I made a P&L matrix:

Assumes equal share amounts. I bolded the values that I think are likely outcomes. This trade is also nice because it has positive carry.


misha said...

Why equal shares instead of equal capital?

CP said...

I played with the ratio until I found what I thought was the best risk/reward pattern in the P&L matrix.