Livestock Options

Discussion in 'Ag Futures' started by youngtrader, Jul 2, 2008.

  1. Anybody here trading options on hogs, cattle, feeders?

    I am bidding for a auggie 112/116 call spread in auggie feeders today.

    Thinking about putting on a 74/70 p 1x2 ratio spread in auggie hogs.

    Whats everybody else doing or thinking about doing?
     
  2. YT , after reading some street comments on SFD, smithfield foods today, I focused on the herd of hogs and how some analysts were forecasting massive liquidation into the fall and that something similar to 1998 could happen where Hog prices went to 10 cents.


    I really can't think that this is a conceivable outcome, but then again, who knows.

    I was bidding on some Dec Lean Hog 60 puts for 60pts and was unable.

    If hogs are really a short, why not sell some Jun 09 Hogs up in the mid high NINETIES???
     
  3. been so busy guys finally have time to type in here. i have never traded livestock options just grains what is the liquidity like?
     

  4. civeratrading

    I do believe that due to the herd liquidation caused by higher feed prices we will see continued pressure on hogs. However with corn looking like it could put in at least an intermediate term top here I think front month hogs could catch a bid and we have seen that so far today and yesterday a little bit as auggie hogs hold 70 (I never got filled on my ratio spread and you have no idea how pissed I am!!!).

    However if we have heard liquidation now remember that is extremely bullish for deffered hog futures.........there will be absolutely no hogs around by early next year or late this year even!

    Didn't get filled on my feeder call spread either........seems like these livestock guys try to screw you really bad on bid/offers........so im not willing to pay up.

    Kind of off topic but civera what do you think of buying a 12/14 oct ratio 1x2 spread? I bought one yesterday for .22 Sold 39% vol in the 14 call and bought 34% vol in the 12 call. Plus I think 14 is just about where the train stops on this sugar run..........its so funny........we were trading 10 cents a pound not too long ago and now we are at 14 and absolutely nothing has changed fundamentally!!!
     

  5. Rtrader

    Liquidity is not bad if you are doing naked calls or very simple spreads (call or put vertical spreads). Im sure it gets a little hairy when you want a quote on a butterfly or condor though.........
     
  6. Tried to buy some auggie 72 hog calls last minute but didn't know the merc closed early.......guess Ill have to try again monday.

    Have a good weekend guys
     
  7. YT:

    The 12/14 ratio call spread is interesting if in fact 14 is the top in sugar.

    See, the difficulty for me in arbitrarily stating that 14 is the top.

    Sugar has lagged vis a vis other "energy commodities" and I wouldn't want to underestimate a speculative push that takes out prior highs.


    I have witnessed way too many "5 sigma" events for me to feel entirely safe writing premium like that.


    Ratio spread trades, IMHO work out nicely when you expect massive volatility and are constructed by selling the in the money strike 1x to finance the purchase of two further strikes.

    So in sugar, betting that Sugar could explode to the upside:

    I'd actually sell 1x 12strike and buy 2x 14 strikes for a credit of 22 cents and take the other side of your trade as I prefer to quantify my downside and let the upside run.
     
  8. yt, how were you constructing your Aug Hog spread?
     
  9. definitely interested in looking at ratio ideas........
     
  10. Don't you find the liquidity a problem? I always got the impression livestock was a bit like lumber - easy to get in, hard to get out (unless you offer a local a huge edge to take your order and flip it to his buddy 2 mins later). Last time I traded hogs was a decade ago and I still cringe at the fills.
     
    #10     Jul 3, 2008