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Short Live Cattle Calendar Spread and Short Kansas Wheat Calendar Spread

SpreadEdge Capital, LLC - Sat Mar 2, 9:22AM CST

SpreadEdge Capital specializes in seasonal spread trading across a wide variety of commodity markets. A spread trade is the simultaneous purchase and sale of the same commodity with different delivery dates.  SpreadEdge publishes a weekly Newsletter that provides several seasonal spread trade opportunities every week.

Watch List
The SpreadEdge Newsletter includes a “Watch List” of trades that meet our strict screening criteria.  Included in the Watch List are the markets, commodity symbols, entry and exit dates, win %, average profit, average drawdown, best profit, worst loss, and risk level (using a 1-5 scale).  All information is hypothetical and is based on the most recent 15 years of historical data.

This week there are 3 trades on the Watch List that are planned for client and personal accounts.  This video will focus on the short Feeder Cattle calendar spread.

This week there are 3 trades on the Watch List that are planned for client and personal accounts.  This article will focus on the Live Cattle calendar spread.

HYPOTHETICAL PERFORMANCE RESULTS HAVE MANY INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN. IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL PERFORMANCE RESULTS AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY ANY PARTICULAR TRADING PROGRAM.  ONE OF THE LIMITATIONS OF HYPOTHETICAL PERFORMANCE RESULTS IS THAT THEY ARE GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. IN ADDITION, HYPOTHETICAL TRADING DOES NOT INVOLVE FINANCIAL RISK, AND NO HYPOTHETICAL TRADING RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING. FOR EXAMPLE, THE ABILITY TO WITHSTAND LOSSES OR TO ADHERE TO A PARTICULAR TRADING PROGRAM IN SPITE OF TRADING LOSSES ARE MATERIAL POINTS WHICH CAN ALSO ADVERSELY AFFECT ACTUAL TRADING RESULTS. THERE ARE NUMEROUS OTHER FACTORS RELATED TO THE MARKETS IN GENERAL OR TO THE IMPLEMENTATION OF ANY SPECIFIC TRADING PROGRAM WHICH CANNOT BE FULLY ACCOUNTED FOR IN THE PREPARATION OF HYPOTHETICAL PERFORMANCE RESULTS AND ALL OF WHICH CAN ADVERSELY AFFECT ACTUAL TRADING RESULTS.
 

Technical Analysis

Live Cattle has gained in 11 of the past 12 weeks and is up nearly 12% thus far in 2024.  On Friday, Live Cattle closed slightly higher than the highs from September.  However, this recent move higher will likely need to consolidate (at worst) or retrace back to the upward trendline (at best) given the strong bearish seasonality.

Agriculture Seasonality
On Friday 3/1. we enter the most seasonally bearish month for Agriculture markets. This is a period when markets like Sugar, Cattle, Arabica Coffee, and Bean Oil tend to slide lower. 


These bearish trends are especially noteworthy for Sugar (+10% YTD) and Cattle (+12% YTD). These markets have rallied in 2024 and could face larger declines if these seasonal trends materialize.


Live Cattle Seasonality

Selling the Live Cattle October, February calendar spread has hypothetically profited in all 15 of the past 15 years.  

In addition, the average profit to draw down ratio is very strong at 1.34 to 1.

HYPOTHETICAL PERFORMANCE RESULTS HAVE MANY INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN. IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL PERFORMANCE RESULTS AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY ANY PARTICULAR TRADING PROGRAM.  ONE OF THE LIMITATIONS OF HYPOTHETICAL PERFORMANCE RESULTS IS THAT THEY ARE GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. IN ADDITION, HYPOTHETICAL TRADING DOES NOT INVOLVE FINANCIAL RISK, AND NO HYPOTHETICAL TRADING RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING. FOR EXAMPLE, THE ABILITY TO WITHSTAND LOSSES OR TO ADHERE TO A PARTICULAR TRADING PROGRAM IN SPITE OF TRADING LOSSES ARE MATERIAL POINTS WHICH CAN ALSO ADVERSELY AFFECT ACTUAL TRADING RESULTS. THERE ARE NUMEROUS OTHER FACTORS RELATED TO THE MARKETS IN GENERAL OR TO THE IMPLEMENTATION OF ANY SPECIFIC TRADING PROGRAM WHICH CANNOT BE FULLY ACCOUNTED FOR IN THE PREPARATION OF HYPOTHETICAL PERFORMANCE RESULTS AND ALL OF WHICH CAN ADVERSELY AFFECT ACTUAL TRADING RESULTS.
 

Spread Chart
Spread Charts represent the difference between the front and back month contracts and are simply the front month price minus the back month price.  Spreads that are sold profit when the price gets more negative or less positive.  Spreads that are bought profit when prices get more positive or less negative.


To trade Live Cattle, I will sell the October 2024, February 2025 calendar spread.  The optimal entry date is Tuesday, March 5th.

Videos

For a video of this trade.

Purchase the Newsletter and Daily Alerts for under $32 per month with and annual subscription or $49 per month with a monthly subscription.

For a FREE eBook about the SpreadEdge seasonal spread strategy.

More Information

The SpreadEdge Weekly Newsletter is published every weekend and provides a broad overview of the important seasonal, technical, and fundamental indicators within the Energy, Grains, Meats, Softs, Metals and Currency markets.  In addition, spread trade recommendations and follow-up on open trades is also provided.  For a free copy of the Weekly Newsletter, please send an email to info@SpreadEdgeCapital.com

Darren Carlat

SpreadEdge Capital, LLC

(214) 636-3133

Darren@SpreadEdgeCapital.com

www.SpreadEdgeCapital.com

Disclaimer

SpreadEdge Capital, LLC is registered as a Commodity Trading Advisor with the Commodity Futures Trading Commission and is an NFA member. Past performance is not indicative of future results. Futures trading is not suitable for all investors, The risk associated with futures trading is substantial. Only risk capital should be used for these investments because you can lose more than your original investment. This is not a solicitation.


On the date of publication, Darren Carlat had a position in: LEQ24, LEZ24. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.

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