ACE Live Cattle - August 26, 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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Butterfly Spreads small

 

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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: Click here to read a helpful tip about Live Cattle futures and options


Live Cattle

Below are charts for reference. 

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* Tip: Click here on enlarging images


Strategies

Below is a butterfly  It has positive time decay and benefits from an decline in volatility. Transitioning from summer into fall months, the option spread has the potential to benefit from both an increase in price and slight decline in implied volatility given negative vega. It would lose if price moved beyond range extremes and would need to be adjusted or volatility suddently picked up.

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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