Sunday, April 17, 2011
Live Cattle
Live Cattle futures have run up to extraordinary levels with the December 2011 contract reaching $1.26. Technical Analysis shows divergence between the price levels making new highs and the weaker Oscillator. I expect the recent highs to be tested and I will increase my hedges from currently 70% to 100% if this market fails to make a new high. Although I don't often trade options, I will try to sell out of the money calls and buy out of the money puts this coming week.
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Update: I got my options spread on this week for even money, meaning that the calls I sold were priced equally with the puts that I bought. I was surprised to actually get this done because the market quote for that spread was 10 cents at the time. That's the sign of a thin market and one of the main reasons that I don't usually trade options. It will be interesting to see where this goes....
ReplyDeleteOptions follow-up: I sold some of my 'Risk Reversal' options spreads at a profit. That was a nice payday, considering that they cost nothing due to the nature of the spread. I am still holding some Puts at 110 and 114. I am also short the 126 and 128 Calls. At this point, I have taken off the straight futures hedges and I am hoping to get exercised at those higher strike prices.
ReplyDeleteAs for the market, December futures appear to be very strong trading above $1.25 today. According to my charts, the next target is somewhere between $1.28 and $1.30 for December.