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FuturesCom Special Spread Situation
Live Cattle - Lean Hogs
Wed Sept 17 1997
THIS PUBLICATION CONTAINS THE VIEW AND OPINIONS OF THE AUTHOR, EXCEPT WHERE OPINIONS ARE ATTRIBUTED TO OTHER SOURCES. WRITTEN PERMISSION IS. REQUIRED PRIOR TO ANY DISTRIBUTION OR REPRODUCTION. FUTURES TRADING IS RISKY AND CAN CAUSE SUBSTANTIAL FINANCIAL LOSS. THE USE OF OPTIONS AND OPTION TRADING INVOLVES A HIGH DEGREE OF RISK. THE USE OF STOPS MAY NOT LIMIT LOSSES TO INTENDED AMOUNTS. SPREAD POSITIONS MAY NOT BE LESS RISKY THAN OUTRIGHT FUTURES POSITIONS. PAST RESULTS ARE NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. SOURCES ARE BELIEVED TO BE RELIABLE BUT NO ASSURANCE IS MADE FOR ACCURACY. ADDITIONAL RISK DISCLOSURE IS AVAILABLE.
Over the years Cattle has maintained a premium to Hogs.
However the last few years Cattle has been 'under' the price of Hogs due to an earlier bottom period in hogs, higher corn prices which sent cattle into a tail spin in 1996, and other factors .
Such as cattle and hog and herd liquidation Diease scares in Cattle. Improved Exports in hogs ect...Hog futures bottomed in 1994. after herd liquidation and oversupply as a result of Large Hogs farms coming online with no packing capabilities to soak up the extra pigs.
The highs seen last year and this summer may be the highs for a while.. On the other hand Cattle prices should continue to rise well into next year.
Traders should consider a strategy consisting of long Cattle and Short hogs, Starting with the Long Dec Cattle and Short Dec hogs. the current prices is roughly Cattle over hogs by 170 pts. That spread may rise to 520 so during the next 2 1/2 months . Traders should also look farher out to the March and April as i believe prices will eventaully reach 80 cents in Cattle Futures.
Nimble traders should buy Dips in Cattle .. sell rallies in hogs.
Traders should keep in close liason
with my office if you are a Paid Subscriber. If you are not you should
seriously consider doing so.
If you are not yet trading this may be a way to get started.