Spreads In Commodities

Discussion in 'Trading' started by ertrader1, Nov 6, 2003.

  1. ertrader1

    ertrader1 Guest

    I had a HOG spread on ......it did well. However..... I must confess, it was not all my doing. I had some good info on Spreads and decided to coat tail a good trader.....CHEATED.

    I trade options and futures(options intraday) and (Futures longer term, 3 to 7 days when im in them)I am also looking at commodite spreads.

    So.....are there any good books out there on Spreads.....GIVE ME TWO of the best. Also.....i need some links to some sites besides Quotes.ino.com for Commoditie prices....delayed quotes are just fine.

  2. http://www.thestreet.com/p/_tscs/rmoney/futuresshockrm/10124368.html

    Where's the Beef?
    By Howard Simons
    Special to TheStreet.com
    11/04/2003 02:00 PM EST

    In economic terms, cattle convert low-value feed-grain, principally corn, into high-value meat. It takes close to five months to fatten feeder cattle weighing between 700 and 800 pounds apiece to live cattle weighing between 1,100 and 1,350 pounds apiece. This time lag and weight differential account for the unusual mix of contracts required for this spread. The standard combination of contracts for the so-called "cattle crush" spread is four corn (C), five feeder cattle (FC), and 10 live cattle (LC).

    The month combinations, listed in order of the FC month involved, are:

    Jun LC - (Jan FC + Mar C)
    Aug LC - (Mar FC + Mar C)
    Aug LC - (Apr FC + May C)
    Oct LC - (May FC + May C)
    Dec LC - (Aug FC + Sep C)
    Feb LC - (Sep FC + Sep C)
    Apr LC - (Oct FC + Dec C)
    Apr LC - (Nov FC + Dec C)

    The spacing of the FC contracts through the year is a function of the breeding cycle of cattle, an indelicate topic on which we will dwell no further. The futures industry has yet to accommodate their commercial customers: This spread involves three futures contracts, imperfectly aligned in both their size and timing, traded across three different futures pits on two exchanges. While the Chicago Board of Trade's corn contract is highly liquid, and the Chicago Mercantile Exchange's live cattle contract is somewhat liquid, the CME's feeder cattle contract is not very liquid at all. Great care in trading this spread is advised.

    A cattle crush trader at present would focus on the January crush spread, that involving January feeder cattle, March 2004 corn and June 2004 live cattle. During the July-September 2003 period, the economics of this crush spread didn't differ greatly from those of the January 2003 FC crush spread. However, the recent jump higher in March 2004 corn prices -- they went from $2.205 a bushel on Oct. 20 to $2.525 on Oct. 31 -- has threatened to make cattle feeding uneconomic.
  3. nkhoi

    nkhoi Moderator

  4. H2O


  5. Hopefully, every time I enter a position I am coattailing. I want to ride the wagon train, not blaze new trails. Nice trade er'.