Possible Exits for Feeder and Live Intra Spreads

The most recent Cattle on Feed report was within expectations but it also verified the growing herd and long-term stance of a bearish market. The cattle market prices dropped significantly after the report. Dropping along with the outright futures, both live cattle and feeder intra spreads have reached a point where an exit should be considered.

Feeder Intra Spread – Recommended Dec 28, 2015

The initial recommendation back in December was above $2.00. Given the recent lows of about $1.20, an exit for approximately $400 is a reasonable target (i.e. before fees). The seasonality of this spread is not in our favor so I think this would be a prudent decision. The growing herd will continue weigh on the market but I’m guessing the cattle market will stay range bound for the next 3-4 months.

2016 August-September Feeder Cattle Bear Spread
Futures Contracts: Short Aug ’16 Feeders vs Long Sep ’16 Feeders
Trade Dates: No specific dates but avoid carrying it into August
Entry Target: 2.00+ (adjust based on your personal objectives and risk tolerance)
Margin: $1,700 (check with the CME for changes in margin)

Feeder Cattle Futures Intra Spread

August-September Feeder Cattle Futures Intra Spread – Source: DTN ProphetX

Live Cattle Intra Spread – Recommended March 15, 2015

The live cattle market has been on the same downward trend but saw a much higher top. Given a $5.50 entry, an exit at $4.00 will be approximately $600 (i.e. before fees).

2016 June-August Live Cattle Bear Spread
Futures Contracts: Short June ’16 Live Cattle vs Long August ’16 Live Cattle
Trade Dates: No specific dates but avoid carrying it too close to June
Entry Target: 5.50+ (adjust based on your personal objectives and risk tolerance)
Margin: $900 (check with the CME for changes in margin)

Live Cattle Futures Intra Spread

June-August Live Cattle Futures Intra Spread

tyler@cybersprout.net

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