This is a sample entry from Brian Cullen’s email newsletter, The Cullen Outlook.
June / October LEAN HOG spread:
This is a seasonal spread working off of upcoming supply and demand. With the summer months approaching, pork inventories are comfortably set for near-term contracts (June and July), so the interest tends to fade and the market looks ahead. Typically looking towards ensuring supply for fall months as slaughter tends to increase in August and September as the demand also reaches its peak. This course of action would be supportive for selling near term and buying further out.
- SELLING the JUNE contract
- BUYING the OCTOBER contract
Premium of 5.75 to the SELL side (GTC) … last trade 5.50
- Risk will be 7.25 on a STOP ON CLOSE … ($600.00) plus ALL trading fees
- OBJ will be 2.50 on a limit order … +$1,300.00 minus ALL trading fees
Initial Margin for this spread is roughly $810.00
It may not be possible to limit losses to the exact loss limit depending upon market conditions and the possibility of limit moves.
Have a look:
STOP ORDERS DO NOT NECESSARILY LIMIT YOUR LOSS TO THE STOP PRICE BECAUSE STOP ORDERS, IF THE PRICE IS HIT, BECOME MARKET ORDERS AND, DEPENDING ON MARKET CONDITIONS, THE ACTUAL FILL PRICE CAN BE DIFFERENT FROM THE STOP PRICE. IF A MARKET REACHED ITS DAILY PRICE FLUCTUATION LIMIT, A "LIMIT MOVE", IT MAY BE IMPOSSIBLE TO EXECUTE A STOP LOSS ORDER.
This material is conveyed as a solicitation for entering into a derivatives transaction.
This material has been prepared by a Daniels Trading broker who provides research market commentary and trade recommendations as part of his or her solicitation for accounts and solicitation for trades; however, Daniels Trading does not maintain a research department as defined in CFTC Rule 1.71. Daniels Trading, its principals, brokers and employees may trade in derivatives for their own accounts or for the accounts of others. Due to various factors (such as risk tolerance, margin requirements, trading objectives, short term vs. long term strategies, technical vs. fundamental market analysis, and other factors) such trading may result in the initiation or liquidation of positions that are different from or contrary to the opinions and recommendations contained therein.
Past performance is not necessarily indicative of future performance. The risk of loss in trading futures contracts or commodity options can be substantial, and therefore investors should understand the risks involved in taking leveraged positions and must assume responsibility for the risks associated with such investments and for their results.
Trade recommendations and profit/loss calculations may not include commissions and fees. Please consult your broker for details based on your trading arrangement and commission setup.
You should carefully consider whether such trading is suitable for you in light of your circumstances and financial resources. You should read the "risk disclosure" webpage accessed at www.DanielsTrading.com at the bottom of the homepage. Daniels Trading is not affiliated with nor does it endorse any third-party trading system, newsletter or other similar service. Daniels Trading does not guarantee or verify any performance claims made by such systems or service.