Trade Idea: Taubman Centers Inc. (TCO) vs. Simon Property Group Inc. (SPG)

Here’s a quick statistical setup in a tightly correlated pair of retail REITS.  The trade is to be long $TCO and short $SPG.  Warning: if the bottom starts to fall out of the market $TCO will likely fall faster than $SPG due to liquidity ($SPG trades about 4x’s as many shares daily).  To counter this I’ve skewed the spread ratio to give more slightly more exposure to the short side.  The risk reward in this trade isn’t outstanding but the spread is fairly dependable and -11 is on the near term horizon.  If you’re a longtime reader you’ll remember that I highlighted this trade from the other side (short $TCO and long $SPG) in mid-January (just after that huge pop in the chart).  The algo finally flagged a long trade after over 6-months and ~$13 worth of range.  How’s that for patience?

I’ve definitely had a lack of productivity on the blog this week.  We’re setting up a new office and I’m dealing with programmers on two continents, not to mention all the action in the markets.  Hopefully things will be back to normal by the end of next week.  Good luck with your trading in these volatile conditions.


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