Lean hogs are taking a beating this week... the june contact is down over 7 cents this week. I'm thinking of buy some call options for june/july/oct because this is way over done. All done on fear. -You can not contract swine flu from pork. -Egypt killed 330,000 hogs yesterday. -This is on top of lower production this year... Could this be the trade of the year??
How do you know that pork contracts are down because of swine flu? It could be any number of things. The chart will almost always be better to trade off of than your perception of news.
Why do you think lean hogs are down this week? Sometimes you need to look at news to see what's going on with the markets...
Guess the point isn't that I know better, it is just that it is better to trade of charts than it is to anticipate what tomorrows "why" is going to be. I find my trading is better when I back off the news a bit and trade off price action
I trade volatility, so I end up in many markets looking for options mispricing but I haven't got any of the meats yet.
More of the same. Perceived and actual "liquidation" can put downside pressure on the front-months and support the deferred-months.
Hogs were in a downtrend, some bearish surprise news came out, and they fell another 10% in 4 days, breaking to new lows. I personally would not view that as a great buying opportunity. IF the trend reverses, then there is a clear spot to buy - when the price breaks more than 2-3% above the pre-swine flu levels. That would show the market has shrugged off the bearish news. Until then it's better to be short than long IMO.
I would think if you're looking for some very overpriced put options(to Sell) that are way out of the money then you could find them in the hog and bellie markets right now. Swine flu is a joke and won't be an issue a month from now but you always need to manage risk just in case you don't have the US Govt to bail you out!