This is a sample entry from Andrew Pawielski’s email newsletter, Market Dimensions Advisory, published on December 03, 2015.
I wanted to provide an update on the Feb/June Live Cattle Spread we are holding. We have been holding this trade for roughly 3 weeks now and have been able to get the price movement I was anticipating. We are short @ 9.150 pts and the market is now trading @ 6.850 (+230 pts or +$920 before fees).
As I often mention, a major benefit of spread trading, is that you can take advantage of the reduced margins on certain spreads. This can present an advantage of holding multiple positions where you could not normally do so by holding just a flat priced futures trade, and can reduce some of the erratic daily swings on as well. Obviously, that does add more risk to the trade, and we cannot predict the future, but we know it is a more risk adverse method when looking for longer term trends that just holding a flat priced futures position. The reason I say this, is because the meat market spreads often are a great example of being able to hold multiple positions on spread recommendations I make. So if you are holding multipole contracts, it is time to reward yourself by ringing the register on a portion of your trade. I would also recommend updating your stop to around the breakeven point of the trade so worst case scenario you made money on this trade.
Multiple contract Holders
Exit partial position @ 6.600 (+1020 before fees) and update stop to Breakeven (your entry price).
Single Contract Holders
For those who are holding 1 spread. It is your choice if you would like to take profits here or hold this trade. There are still several months before expiration on the February leg, so I would like to maintain the position and see if we hit new lows and trade below the $6.00 level. I would recommend updating your stop to breakeven (entry price) as well. So worst case scenario this is a risk free trade.
Updated Daily Chart
Historical Price Movement
For those who would like to discuss my specific entry of this trade, please reach out to me directly, and we can discuss what entry, stop, number of contracts and target will be best for you based on your risk profile.
If you would like to follow along with more of my trade ideas or know what I am watching in the markets I encourage you to sign up for my free trading advisory, Market Dimensions Advisory, below.
dt Pro Futures Trading Software Demo
Daniels Trading’s dedication to providing the premier futures trading software in the industry was driven by our relentless pursuit of satisfying the needs of active traders and offering a trading platform that would truly set us apart in the industry. The result is our dt Pro.
Risk Disclosure
STRATEGIES USING COMBINATIONS OF POSITIONS, SUCH AS SPREAD AND STRADDLE POSITIONS MAY BE AS RISKY AS TAKING A SIMPLE LONG OR SHORT POSITION.
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.
EXAMPLES OF SEASONAL PRICE MOVES OR EXTREME MARKET CONDITIONS ARE NOT MEANT TO IMPLY THAT SUCH MOVES OR CONDITIONS ARE COMMON OCCURRENCES OR LIKELY TO OCCUR.
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.
