Platinum versus Paladium – The Newest Effects!

26 April 2021

Check out the charts below (Pt versus Pd).

Clearly platinum is significantly out of favour versus palladium.  But what is even more interesting is that luxury watches are still priced with the platinum version being the most expensive versus their gold (yellow, pink and white) and palladium counterparts.

Long Platinum versus Palladium Option Strategy

1.  Sell Palladium September 2021 (expires 18 August 2021) Put Option, strike 2,680. Settlement price on 23 April 2021 = 159.20. Delta = 31; Vega = 5.78; Theta = -0.70;  Implied Volality = 37% (skew to ATM = discount 0.16%).

Future reference = 2,861.20

2.  Buy Platinum January 2022 (expires 15 December 2021) Call Option, strike 1320.  Settlement price on 23 April 2021 = 87.20.  Delta =  45; Vega = 3.95; Theta = -0.2628; Implied Volatility = 32.74% (skew to ATM = premium of 2%).

Future reference = 1,239.70

Net premium received = 72.0

This strategy will be positive return if palladium continues on its bullish trajectory despite my bias towards platinum.  That is, at August expiry for the first leg, this strategy will benefit from positive return plus a free call option on platinum.