In my opinion, after the December cattle on feed report came out as bullish, there was a breakout of the sideways consolidation that was happening and now looks to be in an uptrend going into the new year. Cattle herds are declining going forward and production expectations are continuing to drop for the 1st and 2nd quarter. I believe near term contracts should look to be bought if there is upside price risk for beef producers. Deferred feeder cattle contracts (late summer/fall) I would consider waiting until there is a possible consolidation in the market in Q2, in my opinion. In order to take full advantage of price discovery, we must keep an astute eye on potential slaughter numbers and monthly Cattle on Feed reports. Please take a look at the below listed puts and calls, so we can have a productive conversation about hedging your beef production using real examples. Also, select the link at the bottom to use our Cattle producers’ B/E calculator to have a more defined outlook at how you can protect your production. Keep in mind, commissions and fees are not included in the cost of the option.
LIVE CATTLE– PUTS
| MONTH | STRIKE | PRICE | PREMIUM COST |
| FEB | 148 | .125 | $50 |
| 146 | .100 | $40 | |
| 144 | .050 | $20 | |
| APR | 154 | 1.125 | $450 |
| 152 | .825 | $330 | |
| 150 | .600 | $240 | |
| JUN | 152 | 2.175 | $870 |
| 150 | 1.700 | $680 | |
| 148 | 1.325 | $530 |
*Cost in above table does not include commissions and fees
LIVE CATTLE– CALLS
| MONTH | STRIKE | PRICE | PREMIUM COST |
| FEB | 156 | 3.075 | $1230 |
| 158 | 1.875 | $750 | |
| 160 | 1.025 | $410 | |
| APR | 160 | 4.500 | $1800 |
| 162 | 3.375 | $1350 | |
| 164 | 2.425 | $970 | |
| JUN | 158 | 4.175 | $1670 |
| 160 | 3.225 | $1290 | |
| 162 | 2.400 | $960 |
*Cost in above table does not include commissions and fees
FEEDER CATTLE–CALLS
| MONTH | STRIKE | PRICE | PREMIUM COST |
| JAN | 188 | .450 | $225 |
| 190 | .225 | $112.50 | |
| 192 | .125 | $62.50 | |
| MAR | 188 | 3.150 | $1575 |
| 190 | 2.375 | $1187.50 | |
| 192 | 1.775 | $887.50 | |
| APR | 190 | 4.500 | $2250 |
| 192 | 3.600 | $1800 | |
| 194 | 2.825 | $1412.50 |
*Cost in above table does not include commissions and fees
FEEDER CATTLE–PUTS
| MONTH | STRIKE | PRICE | PREMIUM COST |
| JAN | 180 | .575 | $287.50 |
| 178 | .275 | $137.50 | |
| 176 | .150 | $75 | |
| MAR | 180 | 1.625 | $812.50 |
| 178 | 1.175 | $587.50 | |
| 176 | .850 | $425 | |
| APR | 182 | 1.825 | $912.50 |
| 180 | 1.400 | $700 | |
| 178 | 1.050 | $525 |
*Cost in above table does not include commissions and fees
CATTLE PRODUCERS HEDGING CALCULATOR
C:\Users\pMcGinn\Documents\Cattle Producer calculator.xlsx
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. The information contained on this site is the opinion of the writer or was obtained from sources cited within the commentary. The impact on market prices due to seasonal or market cycles and current news events may already be reflected in market prices. 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.