Trade Alert For Hogs, Sooie

Michael BullionLivestock

Lean Hogs have gotten just hammered recently with tariff and trade war fears on top of already weak fundamentals, but the fall may be a bit of an overreaction into oversold territories.  Maybe it’s not and more tariffs or supply fundamentals could have it fall further.  April hogs are trading at a large discount to the cash market, which is atypical for this time of year, points to the possibility of short term volatility.  Cyclically speaking, hogs tend to have a yearly high around May to July when the supply of hogs is at the lowest.  With sharp moves possible in either direction, that to me is time for a strangle with the potential to profit if the market moves in either direction.  You can get some out-of-money puts and calls really cheap, putting down very little capital for a large upside.  Use April Options so time decay is lowest and since we currently see a large discount for April hogs versus the cash market.  We have seen discrepancies when the spot month rolls and continuous moves of 800-1000 points when contracts are less than 3 weeks from expiration.  Using out-of-the-money options you can buy 1 $62 call and 1 $55 put to risk a total of 45 points or around $180 per unit plus commissions and fees.  Scale up from there as your risk appetite allows.

If futures interest you or to discuss trade ideas, please give me a call.

** Call me for a complimentary consultation on any of your future and futures needs **

Open an Account

Join My Mailing List

Michael Bullion, CAIA

Senior Technical Analyst

Walsh Trading, Inc.

Direct: 312.985.0156

             888.391.7894

Fax: 312.256.0109

mbullion@walshtrading.com

www.walshtrading.com

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.