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Home / Futures Blog / Market Dimensions Advisory: Market Action Alert – Live Cattle Spread Entry

Market Dimensions Advisory: Market Action Alert – Live Cattle Spread Entry

January 4, 2016 by Andrew Pawielski

Below you will find the most recent update sent to subscribers of the Market Dimensions Advisory.  This update is highlighting a new Market Action Alert spread trade in Live Cattle.  If you would like to receive these updates in real time to your inbox or participate in the personal update service, please subscribe to the advisory and contact me directly.  To see an archive of these alerts, please visit the blog archive page here Market Dimensions Blog Archive

Published: 1/4/15

Traders,

We are entering a seasonal spread window for Live Cattle futures. This seasonal spread is selling August Live Cattle against buying December Live cattle. As you will see in the chart, this spread relationship has been trending up since the end of October 2015, with us getting very close to parity between these 2 contracts.

Historically according to the Seasonal Algo chart, we see that this price relationship has a history of coming to parity and then widening back out again. We are looking to take advantage of this historical and seasonal move. Since we are still currently on this upward trend, I am looking for an entry with a bit of momentum behind it and looking to break through the -1.975 spread price level. If we get filled on this trade, we will look to exit the spread if we break above parity into positive pricing.

Lastly, since this is a spread trade with reduced margins compared to just straight futures trades, I am looking to trade multiple positions if you have the free margin in your account. For my recommendation, we will be trading 3 spread positions. If you are unsure on the size of the trade you should be taking, please do not hesitate to speak with me to discuss your account and what may be best for your risk tolerance.

Trade: Sell August 16 Live Cattle – Buy December 16 Live Cattle (1/4/16)

Entry: Sell Spread @ -1.975 on a stop GTC – Currently Trading @ -1.325

Risk: If filled Look to exit the spread +.500 (-$990 before fees per spread position)

Target: No working order but looking to break -5.000

Margin: $900

Daily Spread Chart dt Pro:

Source: dt Pro
Source: dt Pro

Seasonal Price Movement:

Source: Seasonal Algo
Source: Seasonal Algo

Risk Disclosure

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.

STRATEGIES USING COMBINATIONS OF POSITIONS, SUCH AS SPREAD AND STRADDLE POSITIONS MAY BE AS RISKY AS TAKING A SIMPLE LONG OR SHORT POSITION.

EXAMPLES OF HISTORIC PRICE MOVES OR EXTREME MARKET CONDITIONS ARE NOT MEANT TO IMPLY THAT SUCH MOVES OR CONDITIONS ARE COMMON OCCURRENCES OR ARE LIKELY TO OCCUR.

THE RISK OF LOSS IN TRADING COMMODITY FUTURES AND OPTIONS CONTRACTS CAN BE SUBSTANTIAL. THERE IS A HIGH DEGREE OF LEVERAGE IN FUTURES TRADING BECAUSE OF SMALL MARGIN REQUIREMENTS. THIS LEVERAGE CAN WORK AGAINST YOU AS WELL AS FOR YOU AND CAN LEAD TO LARGE LOSSES AS WELL AS LARGE GAINS.

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.

Filed Under: Market Dimensions Advisory (MDA)

About Andrew Pawielski

Since 2007, Andrew has been a series 3 registered Senior Futures and Options Broker with Daniels Trading. During this decade plus tenure, Andrew has worked with traders in all different strategies, capital sizes and experience levels throughout the world.

Having this professional brokerage experience and being a futures market participant led Andrew to found the educational trading service Market Dimensions Advisory (MDA). MDA showcases Andrew’s expert technical trading analysis using the TAS MarketProfile tools and other highly regarded volume and order-flow based trading indicators. This professional trading service is a compilation of all Andrew’s trading experiences, concepts, methodologies and real-time trading ideas.

It is Andrew’s goal to empower traders, and through his services, move them from fear to familiarity through frequency.

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Risk Disclosure

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.

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