The revenue from the short sale can help cover the cost of the long position, making the pairs trade inexpensive to put on.
This hedge would most likely be done by shorting 10 front-month futures contracts on NYMEX (of 10, 000 barrels each)--thus balancing out the long position with a short one.
Rising levels of options implied volatility on CAT as well as bearish movement in the share price will benefit the investor by lifting premium on the puts, while the erosion of time value on the long position will work against him.
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The silver net-long position for the managed-money accounts in the disaggregated report decreased to 2, 774 contracts, the smallest net-long position since the report started in September 2009.
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The managed-money accounts in copper increased their net long position by adding more gross longs than gross shorts, pushing the net long position to 7, 695 contracts in the disaggregated report.
The reduction in the net long position might be the smart move in the short term, he added.
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However, the bank said the significant year-on-year growth in total open interest and the record long position held by the money-managers suggest that the market is overbought and vulnerable to a price break and long liquidation.
Even with the rise in the net long position for speculators in gold, the extra weight is not burdensome, said Barclays Capital.
These traders added to their net-long position by bumping up gross longs and cutting gross shorts, allowing the net-long position to rise for the first time since April 26.
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Barclays Capital attributed the rise in the net long position to short covering, and noted that the gross gold positions are at their lowest level since April 2009.
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If things go well for U.S. Steel, the long equity position likely offsets whatever loss you would take on the CDS. U.S. Steel is far from immune to the price impact of Chinese demand, he says, and as a vertically integrated steelmaker it has exposure all along the process from iron ore to finished products.
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Managed money accounts increased their net-long position in gold, adding 3, 342 gross longs and cutting 4, 002 gross shorts, raising the net long position to 99, 458 contracts, erasing a large part of the reduction in net longs seen in the previous report.
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In the legacy report non-commercials increased their net-long position by cutting many more gross shorts than gross longs, lifting the net-long position to 11, 819 contracts.
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Managed-money accounts hacked away at their net-long position in gold, dropping it to 92, 498 contracts, a new record low for the disaggregated report and the first time the net long position is under 100, 000 contracts.
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Citigroup said the net-long position for the managed-money accounts is a record.
In palladium the managed-money accounts slightly cut the net long position to 5, 231 contracts.
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In this trade, the put options act as short-term insurance for the long stock position.
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Non-commercials cut both gross longs and short, but more shorts, lifting the net long position to 22, 505 contracts.
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They added 18, 941 gross longs and cut 9, 626 gross shorts, raising the net long position to 110, 623 contracts.
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They cut gross longs and added gross shorts to lower the net long position to a record low level.
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Clearly, the more vulnerable people should take the heaviest long position in oil.
This is the smallest net-long position the funds have held since late May.
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In the legacy report, non-commercial traders added 872 gross shorts, and 754 gross longs, dropping the net long position to 12, 982 contracts.
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In the legacy report, non-commercial traders added 3, 562 gross longs and cut 2, 943 gross shorts, lifting the net long position to 22, 204 contracts.
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Non-commercials in the gold legacy report added 1, 468 gross longs and cut 3, 621 gross shorts, lifting the net long position to 138, 011 contracts.
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Non-commercials in the gold legacy report added 2, 268 gross longs and trimmed 5, 297 gross shorts, raising the net long position to 151, 218 contracts.
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If the technical readings for the overall market had been stronger I would have been more likely to hold on to the entire long position.
Non-commercials in the gold legacy report saw similar action, adding 14, 990 gross longs and trimming 6, 911 gross shorts, raising the net long position to 140, 126 contracts.
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Managed-money accounts significantly decreased their net-long position in gold, cutting 24, 596 gross longs and adding 6, 224 gross shorts, dropping the net long position to 129, 502 contracts.
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Non-commercials in the gold legacy report added 23, 624 gross longs and sliced 4, 333 gross shorts, increasing the net long position to 129, 423 contracts, its highest level since May 1.
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