Feeder Cattle Call to Action

Packers have been able to knock down cattle prices up North bringing them closer to the south. Last week Live prices ranged from 185.00 to 194.00. We’ve seen the Feeder Index fall as futures prices collapsed as cattle buyers pulled back and were able to get cheaper prices. No sales have climbed as sellers balk at low prices. Sellers have elected to keep cattle on grass and wait for markets to settle in and some areas have seen prices settle in and are moving higher. Some expect the index to rebound as previous sales were light and feedlots may have to get more aggressive to buy cattle as we near August expiration. See weekly continuous chart below. We think if feeders rally, they can trade up to and eventually challenge the 8,13, and 21 day moving averages between 253.000 and 255.000 on the September Board.

Trade Idea
Options
Buy the Sep 245.000 call and sell the January 25 254.00 call. Work the order for a collection of 100 points or $500 upon entry minus trade costs and fees.

Risk/Reward
The risk here is unlimited as one is short a January 2025 option that expires approximately 4 months after the long call expires in late September 2024. We see the possibility and potential that the feeder index returns to where it just came from and well back above the 250.000 level later this Summer and early Fall as scarcity still remains in many areas amid good demand. Its our opinion then September feeders are too undervalued at 245 and could possibly chase the index higher into September. Should that occur, we can cover the option diagonal for 300 points Sep24 over January 25 giving us from entry a 400-point collection using this option diagonal minus trade costs and fees

. Weekly Continuous Chart

Contact Sean, Vice President, Walsh Commercial Hedging Services Phone: 312-957-8103 or 888-391-7894 Email: slusk@walshtrading.com Contact Benedetto DiCostanzo, Senior Market Strategist Phone: 312-957-4163 or 888-391-7894 Email: bdicostanzo@walshtrading.com www.walshtrading.com 311 S. Wacker Dr., Suite 540 Chicago, IL 60606 Fax: 312.256.0109

Walsh Trading, Inc. is registered as a Guaranteed Introducing Broker with the Commodity Futures Trading Commission and an NFA Member.

Futures and options trading involves substantial risk and is not suitable for all investors. Therefore, individuals should carefully consider their financial condition in deciding whether to trade. Option traders should be aware that the exercise of a long option will result in a futures position. The valuation of futures and options may fluctuate, and as a result, clients may lose more than their original investment. PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.

All information, communications, publications, and reports, including this specific material, used and distributed by Walsh Trading, Inc. (“WTI”) shall be construed as a solicitation for entering into a derivatives transaction. WTI does not distribute research reports, employ research analysts, or maintain a research department as defined in CFTC Regulation 1.71.

RISK DISCLOSURE: THERE IS A SUBSTANTIAL RISK OF LOSS IN FUTURES AND OPTIONS TRADING. THIS REPORT IS A SOLICITATION FOR ENTERING A DERIVATIVES TRANSACTION AND ALL TRANSACTIONS INCLUDE A SUBSTANTIAL RISK OF LOSS. THE USE OF A STOP-LOSS ORDER MAY NOT NECESSARILY LIMIT YOUR LOSS TO THE INTENDED AMOUNT. WHILE CURRENT EVENTS, MARKET ANNOUNCEMENTS AND SEASONAL FACTORS ARE TYPICALLY BUILT INTO FUTURES PRICES, A MOVEMENT IN THE CASH MARKET WOULD NOT NECESSARILY MOVE IN TANDEM WITH THE RELATED FUTURES AND OPTIONS CONTRACTS.