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I made a subscription to MRCI for the first time and see that they have many seasonal spread recommendations.
I am not practical familar with these spread tradings with options.
When I have a spread recommendation like this for beginning of May:
Buy Feb Live Cattle(CME) - LCG8
Sell Oct Live Cattle(CME) - LCV7
How do I do that best with an option selling approach?
I am thinking I would sett a LCG8 Put at a specific strike, and buy a LCV7 put at the same strike?
I would use a delta of 5 for the LCG8 Put, and do my usual risk management when it goes against me.
Does this approach makes sense?
Grains are in a weather market. If you read through my thread you will have seen see that I strongly recommend not to sell options when weather determines the price of a commoditiy. Weather is hard to predict, and it can move prices substantially.
When I trade spreads I almost always trade them via outright futures. I do not see a sense in using options. You can use mini-futures in case the normal ones are too big.
And: Be careful. In my experience it does not make sense to trade the suggestions of MRCI without having a detailed look at them.
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There's actually a weather derivatives market, it's all Over The Counter though, not electronic. Energy retailers, both retail and wholesale use them to hedge volume and price risk. Also as an interesting aside "Randall" one of the main characters of NBC's new hit "This is Us" is a weather derivatives trader!
Wondering if you have a time period for weather market?
Reason I ask is part of my job requires watching weather. I have only seen snow on the ground in May twice, today was 2 1/2" the other was may tenth on there was 10".
Now I heard on the radio Kansas had a foot. Which would explain wheat jump. An the bean jump. I'm bout 900 miles north of Kansas.
This weather is unusual for here.
Is this like a black swan as ron99 would say?
The time period for weather markets depends on the commodity.
For corn it is now and for some more weeks, until the seed is in the ground. And in July during the pollination period. For coffee in Brazil it is in September when coffee plants are blooming. Etc.
No, a Black Swan is something that comes without notice. Weather markets are expected. Although we do not know if prices go up or down.
Wondering if you have a time period for weather market?
Reason I ask is part of my job requires watching weather. I have only seen snow on the ground in May twice, today was 2 1/2" the other was may tenth on there was 10".
Now I heard on the radio Kansas had a foot. Which would explain wheat jump. An the bean jump. I'm bout 900 miles north of Kansas.
This weather is unusual for here.
Is this like a black swan as ron99 would say?
