12/22/23
I believe the Cattle Markets are in trouble…Today February’24 Live Cattle was down 0.150 and settled at 168.525, above today’s low of 167.850. Since 1½2 February’24 Live Cattle are down 6.750 or almost 4%. The Feeders posted a gain today. March’24 Feeder Cattle was 1.025 higher today and settled at 224.400, in the middle of today’s range. Since 1½2 March’24 Feeder Cattle are down 5.725 or about 2 ½%. February’24 Lean Hogs gained 0.700 today and settled at 71.350, also in the middle of the sessions range today. Since 11/22 February’24 Lean Hogs are down 0.475, or just above ½%. I have been Bearish the Cattle Markets for a while, and I diffidently still am. The Cattle on Feed Report was released this afternoon, and it did not look good. Here is what Pro-Farmer had to say “Today’s cattle-on-feed report stated the December 1, 2023, large-lot feedlot population at 12.006 million head, up 2.7% from year-ago. That topped industry expectations for a 2.2% annual increase. The industry expected November feedlot placements to fall 3.8% short of year-ago, but the official USDA figure came in at 1.868 million, down just 1.9% annually. November marketings sank 7.4% from last year, which may have a somewhat negative impact on the market since traders expected a 6.7% annual drop. Look for live cattle futures to drop on next Tuesday’s opening”. I think Cattle is still heading lower. Live Cattle toward the 145 level and Feeder Cattle toward the 185 level. The Cattle charts below resemble 2014. I still like the idea of selling into any strength in the Cattle Markets. I still believe this is still the right environment to hedge or put on option trades in the Cattle markets. Next year’s prices: August’24 Live Cattle 171.000, August’24 Feeder Cattle 247.625, August’24 Lean Hogs 94.300.
LIVE CATTLE CALLS
| MONTH | STRIKE | PRICE | COST |
| FEB’24 168.525 | 175C | 1.200 | $480 |
| 180C | 0.525 | $210 | |
| 185C | 0.175 | $70 | |
| ATM 169C 3.125 | ATM STRADDLE 6.700 | EXPIRES 2/2/24 | |
| APR’24 172.125 | 180C | 2.575 | $1,030 |
| 185C | 1.350 | $540 | |
| 190C | 0.825 | $330 | |
| ATM 172C 5.575 | ATM STRADDLE 11.025 | EXPIRES 4/5/24 | |
| JUN’24 170.125 | 180C | 2.925 | $1,170 |
| 190C | 1.300 | $520 | |
| 200C | 0.550 | $220 | |
| ATM 170C 6.725 | ATM STRADDLE 13.325 | EXPIRES 6/7/24 |
LIVE CATTLE PUTS
| MONTH | STRIKE | PRICE | COST |
| FEB’24 168.525 | 160P | 0.975 | $390 |
| 155P | 0.475 | $190 | |
| 150P | 0.200 | $80 | |
| ATM 169P 3.575 | ATM STRADDLE 6.700 | EXPIRES 2/2/24 | |
| APR’24 172.125 | 165P | 2.825 | $1,130 |
| 160P | 1.775 | $710 | |
| 155P | 1.075 | $430 | |
| ATM 172P 5.450 | ATM STRADDLE 11.025 | EXPIRES 4/5/24 | |
| JUN’24 170.125 | 160P | 3.025 | $1.210 |
| 150P | 1.275 | $510 | |
| 140P | 0.500 | $200 | |
| ATM 170P 6.600 | ATM STRADDLE 13.325 | EXPIRES 6/7/24 |
AUGUST’24 LIVE CATTLE
| CURRENT PRICE | PRICE ACTION | PRICE AFTER MOVE | STRIKE | CURRENT PRICE |
| 171.000 | 10% BULL MOVE | 188.100 | 188C | 2.050 |
| 171.000 | 10% BEAR MOVE | 153.900 | 154P | 2.150 |
| 171.000 | 20% BULL MOVE | 205.200 | 204C | 0.550 |
| 171.000 | 20% BEAR MOVE | 136.800 | 138P | 0.550 |
| 171.000 | 30% BULL MOVE | 222.300 | 222C | 0.175 |
| 171.000 | 30% BEAR MOVE | 119.700 | 120P | 0.100 |
FEEDER CATTLE CALLS
| MONTH | STRIKE | PRICE | COST |
| MAR’24 224.400 | 225C | 8.125 | $4,62.50 |
| 230C | 5.975 | $2,987.50 | |
| 235C | 4.300 | $2,150 | |
| ATM 224C 8.625 | ATM STRADDLE 16.850 | EXPIRES 3/28/24 | |
| APR’24 229.525 | 235C | 7.725 | $3,862.50 |
| 240C | 5.950 | $2,975 | |
| 245C | 4.525 | $2,262.50 | |
| ATM 230C 9.875 | ATM STRADDLE 20.225 | EXPIRES 4/25/24 | |
| MAY’24 233.950 | 244C | 7.575 | $3,787.50 |
| 250C | 5.750 | $2,875 | |
| 254C | 4.775 | $2,387.50 | |
| ATM 234C 11.675 | ATM STRADDLE 23.400 | EXPIRES 5/23/24 |
FEEDER CATTLE PUTS
| MONTH | STRIKE | PRICE | COST |
| MAR’24 224.400 | 215P | 4.550 | $2,275 |
| 210P | 3.150 | $1,575 | |
| 205P | 2.175 | $1,087.50 | |
| ATM 224P 8.225 | ATM STRADDLE 16.850 | EXPIRES 3/28/24 | |
| APR’24 229.525 | 220P | 6.100 | $3,050 |
| 210P | 3.300 | $1,650 | |
| 200P | 1.675 | $837.50 | |
| ATM 230P 10.350 | ATM STRADDLE 20.225 | EXPIRES 4/25/24 | |
| MAY’24 233.950 | 220P | 6.025 | $3,012.50 |
| 210P | 3.475 | $1,737.50 | |
| 200P | 1.925 | $962.50 | |
| ATM 234P 11.725 | ATM STRADDLE 23.400 | EXPIRES 5/23/24 |
AUGUST’24 FEEDER CATTLE
| CURRENT PRICE | PRICE ACTION | PRICE AFTER MOVE | STRIKE | CURRENT PRICE |
| 247.625 | 10% BULL MOVE | 272.387 | 272C | 7.050 |
| 247.625 | 10% BEAR MOVE | 222.862 | 224P | 6.525 |
| 247.625 | 20% BULL MOVE | 297.150 | 296C | 3.150 |
| 247.625 | 20% BEAR MOVE | 198.100 | 200P | 2.200 |
| 247.625 | 30% BULL MOVE | 321.912 | 320C | 1.525 |
| 247.625 | 30% BEAR MOVE | 173.337 | 174P | 0.575 |
LEAN HOG CALLS
| MONTH | STRIKE | PRICE | COST |
| FEB’24 71.350 | 75C | 1.225 | $490 |
| 80C | 0.350 | $140 | |
| 85C | 0.125 | $50 | |
| ATM 71C 2.925 | ATM STRADDLE 5.500 | EXPIRES 2/14/24 | |
| APR’24 77.575 | 85C | 1.550 | $620 |
| 90C | 0.700 | $280 | |
| 95C | 0.325 | $130 | |
| ATM 78C 4.125 | ATM STRADDLE 8.675 | EXPIRES 4/12/24 | |
| JUN’24 92.300 | 100C | 2.400 | $960 |
| 110C | 0.700 | $280 | |
| 120C | 0.225 | $90 | |
| ATM 92C 5.675 | ATM STRADDLE 11.050 | EXPIRES 6/14/24 |
LEAN HOG PUTS
| MONTH | STRIKE | PRICE | COST |
| FEB’24 71.350 | 65P | 0.675 | $270 |
| 60P | 0.225 | $90 | |
| 55P | 0.075 | $30 | |
| ATM 71P 2.575 | ATM STRADDLE 5.500 | EXPIRES 2/14/24 | |
| APR’24 77.575 | 70P | 1.600 | $640 |
| 65P | 0.700 | $280 | |
| 60P | 0.325 | $130 | |
| ATM 78P 4.550 | ATM STRADDLE 8.675 | EXPIRES 4/12/24 | |
| JUN’24 92.300 | 84P | 2.375 | $950 |
| 74P | 0.750 | $300 | |
| 64P | 0.225 | $90 | |
| ATM 92P 5.375 | ATM STRADDLE 11.050 | EXPIRES 6/14/24 |
AUGUST’24 LEAN HOGS
| CURRENT PRICE | PRICE ACTION | PRICE AFTER MOVE | STRIKE | CURRENT PRICE |
| 94.300 | 10% BULL MOVE | 103.730 | 102C | 2.950 |
| 94.300 | 10% BEAR MOVE | 84.870 | 86P | 2.925 |
| 94.300 | 20% BULL MOVE | 113.160 | 112C | 1.000 |
| 94.300 | 20% BEAR MOVE | 75.440 | 76P | 1.050 |
| 94.300 | 30% BULL MOVE | 122.590 | 122C | 0.375 |
| 94.300 | 30% BEAR MOVE | 66.010 | 68P | 0.425 |
10 Year Live Cattle Chart Below
10 Year Feeder Cattle Chart Below
I have market commentary and option charts in Pure Hedge – Livestock
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Bill Allen
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