Lost $600 per in futures, still holding Dec 166/168 Calls Most likely will sell Futures higher than Wednesdays' close, at 167 or higher Thursday and buy Calls to hedge, and liquidate Dec 166 current Call.
Wow, those calls were a long-shot, no ? Equity action is pointing to slowing economy....lower demand for everything....including expensive steak.
My style long term commodities, are based yearly charts, weekly charts, daily/intra for entries. I sell new contract highs, based on trendlines, five minute charts or some kind of measured move, but I am generally selling new contract highs/buying new contract lows when I have proper rules identifying and always hedging with options. Trading this way through the years, I have taken over twenty attempts to finding extremes, losing in the futures, make overall profit cause of the options some of the times. It is similar to playing video poker, you play many tries to hit the Royal Flush, you understand the math. Most likely will sell Futures at 167 or higher depending on 9am cdt open and buy Calls to hedge, and liquidate Dec 166 current Call and hold 168 calls. If price gaps much higher than 167, will sell under highest five minute bar area.
Watched right after unemployment report came out, Live Cattle shot up pretty quick, 1.25 from Thursday close. On the five minute, reduction of volume and reversal bar gave me images the high is in. Started selling early Dec Futures between 167.35 and 167.10, ave price 167.175. Bought Dec 170/172 Calls to hedge at ave 2.60/1.85 At ave 164.175 on futures, hedges be liquidated, mental stops lowered to breakeven minus losses on hedge. I had wanted to keep the Dec 168 another day if the market had not jumped higher so quickly, but started liquidating both calls getting ave price on Dec 166 of 4.40, on Sept 29 bot on ave 2.53, making 1.87, Dec 168 was bot at ave 1.80 and sold at ave 3.35, making 1.55, one of each made 3.42 less futures loss of 1.50, gives over all profit 1.92 Mental stops of approx. $600 on futures after market opens, if price gaps over mental stop, will wait for ten minutes and place stop beyond those highs. Often times especially on Monday, price has gone extreme and beyond where stops would have been placed, so waiting a little longer has saved me a ton through the years as often the extreme is high/low of day/week. My Long Term Commodity method happily is automated a fair amount with the exception of the options. Once position gets to breakeven stop, it is not trailed in anyway. I do have a 12 point target on half the contracts, but even if target is made, breakeven stop does not change. Stops have to be rebalanced after rollovers and some trades will go on for more than three years.
All the ag commodities are green today. Dollar is down somewhat, but still surprised by a strong bounce in the grains over the past two days.
Exactly....lots of cross-currents right now. With a weakening economy, the demand for beef must come down. Question is : when will this situation get realized in the futures market ?
That was a quick minus $600 each on all entries, options are mildly profitable. Tomorrow will watch five minute bars, want to see price to cover the losses and pay me a little for my time.
Other people I work with are talking with cattle producers. They are saying that farmers with lots of cheap grain who don't want to sell at these low prices are buying any and all cattle to feed it to. This may be supporting the cash side of the market right now.