Trade Ideas: Hogs and Corn

MEATS

Friday was an interesting day for Lean Hog, the USDA reports showed hog slaughter for the week at 2.030 million down 3,000 from last week and down 67,000 from last year. For the year so far hog slaughter is down 3.9% from last year, making a total of 28.58 million hogs slaughtered this year. If you read anything about hogs you will see that the “shortage” is the main driver in higher prices. The front month out-right futures look parabolic, with big indications that hogs are in a bubble. As someone that has been trading for a while, bubbles pop and the down side is typically fast and heavy. So I like the contrarian side of hogs, playing it from the short side.

Trade Idea: Lean Hog October14/December14 The spread data that we use looks at historical prices on this Oct/Dec spread, and since 1966 this spread has never traded this high. The seasonality of this spread is non- directional, however the first week of May we typically see lower prices in this spread. The 5 and 15 year averages are highly correlated and tell the same story which is lower prices starting the first week of May and prices bottoming out the first week of June. We are a seller of this spread (Short Oct-Long Dec). We would love to see this spread trade higher up around $12.5 as our first line of entry. Our second line of entry would be $13.5. Our stop will be $14.50. Total risk is $1,200. Our target is $10.00, making our profit goal $1,700. (if we have an opportunity to add a second contract at $13.5 we will cover at $11/$11.5) Right now we have an GTC order in at $12.5.

HOG

Win%—–70%

Days in Trade—–159

Worst Down—-($857.94)

Best Up—–$1299.52


 

GRAINS

This week in grains we have been watching corn as its setting up a potential level to trade from. Now that the big USDA numbers are public we are focusing on grains and corn in particular.

Trade Idea: Corn December14/March15 We are looking to see a lower priced corn spread, so we are a seller (short Dec14-long Mar15) Seasonality of corn this time of year, with this spread in particular is fairly bearish. The 5 and 15 year price average is not as correlated as we would like, but both point to lower prices. We are a seller at $-5.00 with our first set and $-4.00 with our second set. We are risking up to $-7.00. Our target is $-10.00. We are risking $125 per contract and our profit goal is $275 per contract.

Corn

Win%—–100%

Days in Trade—–76

Worst Down——($40.83)

Best Up——-$134.17


 

Our current positions are  Short Aug/Oct Nat gas @$.012, Short June/July Crude Oil @$1.77

Closed Positions-Long May/June Gasoline (Original price was .0176, we covered 0.0225 up 49 ticks $205.8 per contract)

Our Working Orders (GTC) Short Oct/Dec Lean Hog @$12.50, Long May/July Soybeans@17.00

 

 

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