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The Dec hogs have an open interest of around 53,000, so no problems there, but the May '19 are definitely on the thin side
with OI of just over 200. However, I had no problems getting filled, and in fact, I remember I got a good price. I like the
trade cos it's been profitable for the last 9 years out of 10. The 'Worst' and 'Best' loss/profit figures looked OK, and the
margin requirement was around $900/contract. In fact, the trade is near to my closing point - opened at -17, and will
close at -22, giving $2,000 profit per contract (currently around -21).
Can you help answer these questions from other members on NexusFi?
I still assume that you sold the HEZ and bought the HEK. Bear spreads in the Hogs work well at this time of the year, if there is no desease etc.
Be careful: Today there came the news that in china a desease has broken out among hogs. This was the reason for prices moving upwards today. In the short run, this could hurt our bear spreads.
And: In case Mr. trump and Mexico sign a trade agreement, this would also be favourable for the hog prices and could hurt our spreads.
I'm looking to put on a long position in hogs and wanted to solicit your feedback. I have been looking at the COT report and saw that commercials have one of the largest long position in the history of COT reports at +37.3k contracts. Conversely, large specs. are at their 2nd lowest level at -26.5k contracts.
History shows, that similar COT positions have led to higher prices for hogs but given the current geo-political climate, is this time different? As you mention, given the hint of thaws in some of the adverse trade actions (see the outline EU trade deal announced late last month) could something change on the US-Mexico front that would re-open the market for US producers?
Granted, I didn't do my COT research based on % of OI, just aggregate levels and OI has jumped markedly as of late so that could color the analysis differently.
I currently hold a long position in LHG9. Reasons are COT data, the consideration, that Mexico will import again within the next few months (additionally this problem is probably already priced in), and the fact that I consider the price of the February future as cheap compared to the cash price I expect in February. I hold outright futures and the LHG P50.
Additionally I hold the LHG-LHV spread for seasonal reasons.
Whereas I bought the long LHG9 position recently I would not buy the LHG9 - LHV spread at current prices.
I wasn't in this, and I see it has moved up very nicely.
You may recall, I posted this "Last month, I opened the HEZ18-HEK19 after I saw it on seasonalgo. Opened at around -17, and currently in profit." on 03-Aug. I've closed this last week at -22. I really like this trade. It went very smoothly and as
per plan. If this spread goes back up to around -18 I may re-enter.
I'm also holding the LEV18-LEZ18 but this is not doing anything much right now.
This time of the year often is the time of the bear spreads in hogs. Currently I hold the LHG-LHZ.
Additionally I hold various short call options in the meats (see thread "Diversified Option Selling Portfolio") and a long position of LHM9, as I expect a large amount of hog imports by China in 2019 (severe desease problems).
I am assessing the possibilities for lean hogs August contract LEQ19 (particularly shorting) as I consider that prices are relatively elevated currently. Any other consideration to consider?
I am sure you have read about the severe problems regarding hogs in China.
In case there is a deal between the US and China, the price of HEQ might go through the roof. The HEQ contract was above 130 in 2014, when another desease plagued hogs in the US. There are clever people calculating a maximum price, but if there is panic you never know ... I do not intend to sell HE futures in the near future. The time will come when a deal between the US and China has been made.
I am long hogs via the HEV-LEV spread. In my opinion, live cattle are overpriced, and the effect of a deal will be much larger for HE than for LE. In case there is no deal or the deal is postponed too far out, the price of LE will come down further together with the price for HE. Thus, the risk of the spread to me seems to be smaller than for outrights.
I am also thinking about buying a small lot of HEG20 futures, which currently are about 82. I hope for a set-back to enter this trade.
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
