ACE Live Cattle - July 12, 2019

Below is an illustration trading futures options on Live Cattle.  Our post shows bullish and bearish positions using a combination of call and put options.


Trade Options on Futures

Live Cattle * Directional & Neutral Positions

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Volatility

Options fall into the category of being slightly undervalued in non-volatile markets in the weekly options report. Ask about the Weekly Option's Report for more information or watch our video.

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Term Structure

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Notes:

Contract Size - 40,000 lbs (~ 18 MT)

Tick Size:  $.00025 per pound (=$10 per contract)

Trading Hours: CME Globex: Sunday - Friday 6:00 p.m. - 5:00 p.m. Eastern Time (ET) with  trading halt 4:15 p.m. - 4:30 p.m.

* Tip: Understanding what the numbers mean when looking at Live Cattle prices. The quotation you see is U.S. dollars and cents per cwt (hundred weight). Each contract you are buying or selling is 40,000 pounds.  A 1 tick move is $10 USD calculated as $0.00025 x 40,000 lbs.  Think of quotes as dollars per hundred pounds (or cents per pound).

?ml=1" class="modal_link" data-modal-class-name="no_title">* Tip: Click here to read a helpful tip about Live Cattle futures and options


Live Cattle

Below are weekly & daily charts for reference. F3=38.2 ; F5 = 61.8 retracements ; BB = Bollinger Bands

Current price @ 108.50

Trends on weekly, daily up.
Cross above MACDP weekly on Monday

Resistance

114.300 OB week
113.200 F5 week
111.025 50% retrace week
109.700 F3 daily
108.950 F3 daily
108.850 F3
108.725 prior high week
108.125-275 agreement daily

Support

103.825 F5 month
101.975 prior low month
101.450 COP week

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* Tip: To view a larger chart image, simply right click on the image with your mouse. Next, select view image. Be sure to click the back arrow on your browser to go back to the original page.

?ml=1" class="modal_link" data-modal-class-name="no_title">* Tip: Click here on enlarging images


Strategies

Below is a calendarized Fly.  It has positive time decay and benefits from an increase in volatility. Transitioning from summer into fall months, the option spread has the potential to benefit from both an increase in price and implied volatility with positive vega. It would lose if price declined or volatility declined.

The % yield shown in the diagrams below represent an estimated return on margin from projected dates shown below. The structure has positive time decay which is an advantage over holding outright options.

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