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Meats
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Created: by myrrdin Attachments:1

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Meats

  #31 (permalink)
Market Wizard
Linz Austria
 
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Sagal View Post
Time to come back on this topic. OK there was 31.4MMT of lean hogs bought by China this week but the real question for me (I am short call option at 114 HEQ19 and it has already lost more than 70% of the value) is by when the price will go up and if...
My assumption, as we previously discussed. was that August expiry date will be fine with this level (and I was even ready to double it for 120 if needed be...). I am monitoring and ready to buy back my short call if things are not turning well for me.... Not sure that I will take another short call option for the end of the year though...
These articles are summarizing well (my previous views) the fact that timing is key and the level of price to be reached is also key even if one is bullish...which is still not my case....I am neutral at the current level around 90 - 95
https://www.porkbusiness.com/article/chinas-love-pork-may-not-be-enough
https://www.porkbusiness.com/article/swept-under-rug-5-factors-influencing-hog-prices

Congratulation to your successful trade !

The only outright or short option position I hold in the meats is the short HEM P88, which I sold ITM at approx. 3.5. Thus, it will make money if the future ends above 84.5 .

I did not buy the HEG futures I talked about in another post. The risk is extremely high. Eg. there might be a message about the desease having moved to the US during the weekend - and HEG prices might move limit down for some days ...

Best regards, Myrrdin

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  #32 (permalink)
Market Wizard
Linz Austria
 
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I do not hold any long or short outright positions in the hogs market. The reason is the significant risk of large upwards or downwards moves, depending on the discussions between the US and China.

The only position I bought recently is a +LHV -2*LHZ +LHG spread. i consider the December contract as significantly overvalued compared to the October and February contracts.

Profit potential looks good - my target is between US$ 8 and 9.

Best regards, Myrrdin

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  #33 (permalink)
Market Wizard
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I am bullish Live Cattle for a while now.

Currently I hold the LCQ P100, the LCZ P100 and an outright position in the LCG.

Best regards, Myrrdin

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  #34 (permalink)
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myrrdin View Post
I am bullish Live Cattle for a while now.

Currently I hold the LCQ P100, the LCZ P100 and an outright position in the LCG.

Best regards, Myrrdin

Thanks for the information. Could you please elaborate on the whys?
I know you do not trade on fundamentals but no way for me to sell an option expiring in 4 months or more just based on Technical Analysis.
I was watching while home training on a TT bike BNNBloomberg (focusing on Canada) replays videos on commodities from Friday and I noticed that there are concerns for the Canadian farmers due to apparently some restriction on beef imports from China. Is it something in that direction (because I could almost say that on the contrary if it is about that it could be bearish)? Or is it something in the direction of substitution for Chinese Hogs due to ASFV (African Swine Fever Virus)?
Is it seasonality?

I am asking because Live Cattle is not anymore on my priority list. I follow Lean Hogs and I am assessing when to enter and in which direction with selling options...By the way talking about substitution poultry prices have increased a lot and consumption as well in China. So one needs to be careful for the right timing for entering Lean Hogs market.


Last edited by Sagal; July 14th, 2019 at 06:22 AM.
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  #35 (permalink)
Market Wizard
Linz Austria
 
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Sagal View Post
Thanks for the information. Could you please elaborate on the whys?
I know you do not trade on fundamentals but no way for me to sell an option expiring in 4 months or more just based on Technical Analysis.
I was watching while home training on a TT bike BNNBloomberg (focusing on Canada) replays videos on commodities from Friday and I noticed that there are concerns for the Canadian farmers due to apparently some restriction on beef imports from China. Is it something in that direction (because I could almost say that on the contrary if it is about that it could be bearish)? Or is it something in the direction of substitution for Chinese Hogs due to ASFV (African Swine Fever Virus)?
Is it seasonality?

I am asking because Live Cattle is not anymore on my priority list. I follow Lean Hogs and I am assessing when to enter and in which direction with selling options...By the way talking about substitution poultry prices have increased a lot and consumption as well in China. So one needs to be careful for the right timing for entering Lean Hogs market.

I am trading based on fundamental information.

Regarding meats, I get this fundamentals from a paid newsletter. Thus, I do not want to go into details.

One argument for being long Live Cattle is the expectation of rising cash price in the near future. Another argument for being long the February contract is the expectation that from Q4 2019 to Q1 2002 the supply of Live Cattle will get very tight. And my third argument is, as mentioned by you rising exports to China. The only strong potential negative influence I can see for the next couple of weeks is that stock indices might come down significantly.

Regarding the hog market, I intend to buy outright futures or sell puts for 2020 contracts if they come down to the July lows. Main fundamental argument is buying from China.

Best regards, Myrrdin

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  #36 (permalink)
London, UK
 
 
Posts: 68 since Jan 2018
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LEV19-HEM20

On Mon, 05-Aug, I sold the LEV19-HEM20 meat spread for around 27. It's a seasonal which has a very good track record, being profitable for the last 10 years, and I traded it successfully a year ago. The margin requirement is high though.

At present the trade is showing a 5 point profit.

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  #37 (permalink)
Legendary Market Wizard
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Journal

Hi @myrrdin

Have you considered starting a journal? I would love to see your trades on regular bases. I know spreads are not a daily thing, but it would be nice to watch/follow with a journal.

Thanks
K

Follow me on Twitter Visit my Facebook Visit my futures io Trade Journal Reply With Quote
 
  #38 (permalink)
Legendary Market Wizard
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zxcv64 View Post
On Mon, 05-Aug, I sold the LEV19-HEM20 meat spread for around 27. It's a seasonal which has a very good track record, being profitable for the last 10 years, and I traded it successfully a year ago. The margin requirement is high though.

At present the trade is showing a 5 point profit.

Do you worry about the China Pig Situation?

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  #39 (permalink)
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SMCJB View Post
Do you worry about the China Pig Situation?

Sure, the ASF virus is influential in any hog trade. And there are so many fundamental factors at play (trade war, oil price, yaun devaluation etc) and my ability to make sense of them enough to come up with a creative trade idea is limited. So, I entered this trade based on previous history, and my own success with it. It's already pretty close to my target profit, so I may exit within a few days.

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  #40 (permalink)
Market Wizard
Linz Austria
 
Trading Experience: Advanced
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zxcv64 View Post
On Mon, 05-Aug, I sold the LEV19-HEM20 meat spread for around 27. It's a seasonal which has a very good track record, being profitable for the last 10 years, and I traded it successfully a year ago. The margin requirement is high though.

At present the trade is showing a 5 point profit.

I am surprized you chose the June contract for the short hogs leg. In case there is a solution for the conflict China / USA the price of this future will explode. I would prefer the October 19 contract, as even in case there is a solution for this conflict during the next couple of weeks there will not move many hogs to China until October.

Generally I currently do not like to trade hog contracts for 2020.

Best regards, Myrrdin

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