This one can be a volatile spread, and that goes both ways.
The idea is to buy Live Cattle and sell Lean Hogs for a trade that runs May though to August. The reason for this trade is seasonal. That is, there is a pattern that tends to repeat itself each year.
Heading into mid-year, Cattle slaughter tends to be high while Hogs are at the opposite end. But that pattern reverses itself when we are past mid-year and looking towards the end of the year. That creates the spread movement.
In the last 25yrs, buying April Cattle and selling Dec Hogs, has lost money only 3 times. 22 out of 25 is not bad. Optimized data of course, but there is a pattern there! The average profit in that time has been over $3500 for one spread. You can also do this spread in nearby contracts, eg Dec Cattle.
It’s a volatile one though. Drawdowns can be, what’s the word…interesting. It makes this trade more about getting entries correct. An early to mid-June pull back has happened in more years than not. Waiting for that can give a better entry time.
Caveat: it ain’t that simple. Spread trading takes knowledge, support, patience and trade management, but the gems are there when we look in the right place.
One last thought: you cannot use 'beef stew' as a password. It's just not stroganoff.
- Please follow and like for more trade ideas and learny stuff! -
The idea is to buy Live Cattle and sell Lean Hogs for a trade that runs May though to August. The reason for this trade is seasonal. That is, there is a pattern that tends to repeat itself each year.
Heading into mid-year, Cattle slaughter tends to be high while Hogs are at the opposite end. But that pattern reverses itself when we are past mid-year and looking towards the end of the year. That creates the spread movement.
In the last 25yrs, buying April Cattle and selling Dec Hogs, has lost money only 3 times. 22 out of 25 is not bad. Optimized data of course, but there is a pattern there! The average profit in that time has been over $3500 for one spread. You can also do this spread in nearby contracts, eg Dec Cattle.
It’s a volatile one though. Drawdowns can be, what’s the word…interesting. It makes this trade more about getting entries correct. An early to mid-June pull back has happened in more years than not. Waiting for that can give a better entry time.
Caveat: it ain’t that simple. Spread trading takes knowledge, support, patience and trade management, but the gems are there when we look in the right place.
One last thought: you cannot use 'beef stew' as a password. It's just not stroganoff.
- Please follow and like for more trade ideas and learny stuff! -