Cattle Futures -- Locked LimitDown

ramora · Dec 24, 2003

Quote from marketsurfer:

yes, it could be devastating to the longs--far beyond blowing out your account. when a commodity is locked-- one can lose far more than just the account amount-- i have heard of guys with 3500.00 accounts being on the hook for 250k after an adverse lock move--- and you can't get out of it.

best,

surfer

Hi Surfer,

Last week in another thread we were discussing the pros/cons of futures vs. forex. Risk may be less in the forex side, and this limit down on Cattle is an example.

One forex broker's site is now offering 'margin/risk management' that is described as an automatic margin call when 'required margin amount exceeds the dollar value of the account'. Your losses are limited to your 'dollar value of the account'.

I do not know of any futures broker offering to guarantee fills, or automatic margin call to limit risk to the amount in the account.... Something to consider in this crazy world.

Good luck to all Cattle longs today...

ramora

Pabst · Dec 24, 2003

Quote from ramora:

Hi Surfer,

Last week in another thread we were discussing the pros/cons of futures vs. forex. Risk may be less in the forex side, and this limit down on Cattle is an example.

One forex broker's site is now offering 'margin/risk management' that is described as an automatic margin call when 'required margin amount exceeds the dollar value of the account'. Your losses are limited to your 'dollar value of the account'.

I do not know of any futures broker offering to guarantee fills, or automatic margin call to limit risk to the amount in the account.... Something to consider in this crazy world.

Good luck to all Cattle longs today...

ramora

Forex is an OTC market, dealers can do what ever they want. Cattle futures are exchange traded at the CME. Very illegal to guarantee fills.

Pabst · Dec 24, 2003

Limit moves aren't as deadly now as they were years ago. Now, because of options on futures, a position can be liquidated synthetically. For example if you were long 1 LC you could buy a put and sell a call to offset your futures position. However do to this sudden horrific news, options are pricing in close to a 10 cent break in futures.

Dr. Zhivodka · Dec 24, 2003

Quote from Pabst:

Limit moves aren't as deadly now as they were years ago. Now, because of options on futures, a position can be liquidated synthetically. For example if you were long 1 LC you could buy a put and sell a call to offset your futures position. However do to this sudden horrific news, options are pricing in close to a 10 cent break in futures.

Exactly right! You beat me to it.

Option I.V. soars in this case and makes it very expensive to bail.

Dr. Zhivodka

marketsurfer · Dec 24, 2003

Quote from ramora:

Hi Surfer,

Last week in another thread we were discussing the pros/cons of futures vs. forex. Risk may be less in the forex side, and this limit down on Cattle is an example.

One forex broker's site is now offering 'margin/risk management' that is described as an automatic margin call when 'required margin amount exceeds the dollar value of the account'. Your losses are limited to your 'dollar value of the account'.

I do not know of any futures broker offering to guarantee fills, or automatic margin call to limit risk to the amount in the account.... Something to consider in this crazy world.

Good luck to all Cattle longs today...

ramora

yes, that is a benefit of using dealers to trade forex.

thanks,

surfer

Pabst · Dec 24, 2003

Quote from Dr. Zhivodka:

Exactly right! You beat me to it.

Option I.V. soars in this case and makes it very expensive to bail.

Dr. Zhivodka

Doc, have you seen some of these plays? Some OTM's in Feb. went from cabinet offer yesterday to 2.50 today!!!

Dr. Zhivodka · Dec 24, 2003

No I haven't Pabst. I don't follow the meat complex all that closely. They have always been kind of screwy markets for me. I know the floor guys and the spreaders do okay though.

I just know from experience how these things work. I've seen it a number of times over the years in Stocks Indices and Bondalero's and at the IMM with some Currency Futs.

Are you on the Floor or upstairs?

Best Regards,
Dr. Zhivodka

Pabst · Dec 24, 2003

Quote from Dr. Zhivodka:

No I haven't Pabst. I don't follow the meat complex all that closely. They have always been kind of screwy markets for me. I know the floor guys and the spreaders do okay though.

I just know from experience how these things work. I've seen it a number of times over the years in Stocks Indices and Bondalero's and at the IMM with some Currency Futs.

Are you on the Floor or upstairs?

Best Regards,
Dr. Zhivodka

Been off the floor for four years now.

This upstairs stuff actually takes talent!

I don't trade meats (though my first trade was buying an all time high in Dec79 LC that held for a decade!!). I had to sneak a peak today though to see the carnage. ITM calls down 13 cents! Wow!!

GATrader · Dec 24, 2003

Here is an interesting question for the floor guys who might want to scalp a couple of ticks in this situation. Lets say it is limit offer and then big paper takes the limit offer and ticks up 5 . Mr. Local now thinks it is due for a bounce and buys a couple of contracts hoping for a quick scalp, 1 min later paper sells and is at the limit offer again, and stays there for 2 days turning a small scalp into a massive loss. Is there a way this local might have done it better i.e. safer buy put options perhaps in that 1 minute window, intermonth spread?

Pabst · Dec 24, 2003

Quote from GATrader:

Here is an interesting question for the floor guys who might want to scalp a couple of ticks in this situation. Lets say it is limit offer and then big paper takes the limit offer and ticks up 5 . Mr. Local now thinks it is due for a bounce and buys a couple of contracts hoping for a quick scalp, 1 min later paper sells and is at the limit offer again, and stays there for 2 days turning a small scalp into a massive loss. Is there a way this local might have done it better i.e. safer buy put options perhaps in that 1 minute window, intermonth spread?

Most floor traders in meats scalp spreads. A local would only buy a contract off of limit if he was able to sell another month that was also bid off limit. So he would wind up with long Feb-Short April.