Aug Feeder Cattle.

so we'll stick to the ratio spread b/w feeders and live..

2:3 ratio is because the typical gain of weight occurs in this ratio correct? from 775 to 1300 for example.

Nevertheless I wonder how truly market neutral 2:3 is. If we go limit down on both one day its almost like you're long one extra live contract.

i'm attaching the 2:3 ratio of Feeders to Live using fronth month futures.
 

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The spread isn't market neutral it is designed to be a directional bet on what is basically a cattle feeding margin.

As far as entry timing-we are off the highs of the spread but if it really is turning, which it may, then the spread will trend lower for a long time.

When FC is outperforming LC the spread tends to top out, if only for the short term, so timing can follow FC outperformance for short spreads and LC outperformance for long spreads.
 
what do you think about the grains here. i still think we have some work to do on the downside but i'm eager to buy weakness.

incidentally maybe weak grains support feeders on monday and helps fc outperformance to lc
 
Quote from criveratrading:

what do you think about the grains here. i still think we have some work to do on the downside but i'm eager to buy weakness.

incidentally maybe weak grains support feeders on monday and helps fc outperformance to lc
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It is going to be hot and dry, especially in the western c. belt but I don't really have an opinion on corn like I did in June.

On the cash side, the feedlot bought a lot of corn in June, and I suspect commercials covered some short positions and are putting those on again.
 
Quote from criveratrading:

so we'll stick to the ratio spread b/w feeders and live..

2:3 ratio is because the typical gain of weight occurs in this ratio correct? from 775 to 1300 for example.

Nevertheless I wonder how truly market neutral 2:3 is. If we go limit down on both one day its almost like you're long one extra live contract.

i'm attaching the 2:3 ratio of Feeders to Live using fronth month futures.
More...

Ratio is more like 1:2. 50,000 lbs of FC turn into about 83000 lbs of LC. Spread isn't as good as it was, but it is still a long way from where it can go.
 
thanks,


so what did you guys think of today's action? LC closing under 20 day MA , charts looking heavyish? for some reason I feel offers are going to chase bids in cash trade and we'll be trading 80 by end of week, but i'm not cash connected. looks like choice and select continue to weaken.
 
ey no liveliness on the cattle board. bleh.


very pissed today, got chopped up on some december 86 puts. my tech discipline tells me we retest the highs before we breakdown. my gut tells me we breakdown lower here and head to 80.

bid/offer in options sucks pretty bad. i'm getting the worst fills and not sure if it is the broker's fault or just getting played by the pit. i think many times they post two sided markets with one side being ficticious and the other side real to paint the market one way or the other.

anyway, i'm not shorting the futures and i feel quite uncomfortable trading the fc/lc spread. the spread HAS moved a LOT in $$ terms even if you're doing a one lot.

buying a chunk of OTM put options for dec or oct could be interesting but i always view OTM as a lotto ticket. ATM however is expensive and a lot of time value to pay for.

having execution paralysis .

as far as the corn goes i got chopped too. my view is we are breaking down too hard too quick and that we'll see more damage in the corn belt going forward. i bought some JUL07/DEC 07 via futures at -11.75 last night but stopped out at -12.5 today. Think we can go to -14 on this leg down and DEC 06 futs retesting key 250 area support. Technically, we're not "there" yet to buy call spreads though I purchased some 260/300 call spreads for around 11 and stopped out when we did not manage to trade above yesterday's settlement.

so any opinions great , hope ur trading was better than mine today.
 
reestablished corn bull call spreads and shorted LCZ on strength. LC rallied today as it was the 9th demark buy countdown. i guess i did "right" in covering my long put yesterday. now, i'm just betting into the COF report. we'll see.
 
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