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:
Seasonal Price Movement:
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.
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