Trade Review and Trade Idea: Live Cattle

ENERGY

Since our last post on our short Crude Oil spread we have seen all of our energy spreads move in our favor. Today we will be going over a review of all our energy spreads over the last week.

We have been trading two different spreads on Crude Oil. The first spread was short July/August we sold at $1.00 and this spread is currently trading at $.80. We covered this position yesterday. We will be looking to re-enter at a higher price, or we will wait until we have a strong seasonal pattern to go long a different Crude Oil spreads. We also have been trading short September/October Crude Oil Spread. This spread we recommended on our last post, we moved our limit order to $1.06 and got filled. Today this spread is trading at $.90, yesterday we covered this spread as well. Two days ago we entered a short heating oil spread July/December. We shorted this spread at $.0187, seasonality is very strong and we will be holding this spread into the first week of May. We also shorted a Nat Gas spread August/October. We shorted this spread at $.018. Seasonality is very strong with this spread as well and we would like to hold this spread until the first week of May.

GRAINS

We have had a very active couple weeks in the grain markets. Below is a review of all our spread trades over this last week. We shorted a Wheat spread July/December at $-22.75. We hold a slightly bearish stance on wheat and we expect wheat prices to drop to 6.25 to 6.50 a bushel. Currently this spread is profitable trading at $-23.50 and our target is $-29.00. We bought a Soybean Meal Spread December14/March15. Seasonality is very strong and demand for Soybean Meal typically catches a bid coming into June. We bought this spreads at $.20, currently we are down a little, this is a spread we wanted to go long a bit lower and we have a chance to add to our position. We shorted a Corn spread September14/March15. Front month Corn broke a major uptrend line we’ve been watching and the seasonality pattern is very strong. We sold this spread at $-6.00.

MEATS

This week we are looking to bear spread Live Cattle. I found an interesting view on bear spreading cattle in Moore Research Center, and they say, “During peak cattle slaughter, supplies of beef build. With retail beef consumption slow during the heat of summer, demand for cattle can remain mostly muted for months. Thus, during peak slaughter, the market builds seasonal disparities in demand into its price structure.” As for our view on cattle, which is seasonal, we find seasonal patterns are strong and the statistics of past trades are very appealing.

Trade Idea: Live Cattle Bear Spread Oct14/Feb15 We like this trade for a few different reasons. First, the 5 year and 15 year price averages are highly correlated at 98%. Second, fundamentally we could have more supply with average to slightly below average demand. And thirdly historical statistics are highly appealing to our risk tolerance. As of writing this we are filled a bear spread at $-2.90, if this position goes against us we will add our second half at $-2.70/$-2.60. We will risk $350 per contact on this trade and our target is $-5.00 or $800 per contract.

cattle

Win%—–93%

Days in Trade—–30

Worst Down—–($102)

Best Up—–$494.67


 

Current Trades that are open

1. Heating Oil Bear Spread Short From .0187

2. Live Cattle Bear Spread Short From -2.90

3. Nat Gas Bear Spread Short From .018

4. Corn Bear Spread Short From -6.50

5. Soybean Meal Bull Spread Long From .20

6. Wheat Bear Spread Short From -22.75

About these ads

2 thoughts on “Trade Review and Trade Idea: Live Cattle

  1. Awesome information here, especially since we share a quirky broker with options on GC but not SI. There’s only one trade here that’s baffling: the Dec4-Jan5 bean meal, =/ZMZ4-/ZMF5 , listed as open position “5. Soybean Meal Bear Spread Short From .20.” Text says you’re “down a little” and are “looking to add lower” which would make this a long, not a short. Could you please check that trade and let us know what it was that you did because it looks like an appealing buy at [minus] -$1.50,? Thanks! Did you get stopped out at a loss? And are you still bullish or bearish as originally at +0.20?

  2. Trampy, We are long the soybean meal spread from $.20 and we would add to the long position if it got to -1.50. We are still in the trade and as of writing this the spread is trading at $.50. We are still bullish this position and our target is $1 to $1.50. Sorry for the confusion.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s