Live Cattle v Feeder Cattle - intermarket spread

Position	Contract	Entry	Spread	Allocation	Exit	Spread	Equity	Stop
Long	June LC	88.650			91.25
Short	April FC	100.650	-$14865	1 contract	104.80	-$15900	-$1035	-

Reason for Entry:
This was an interesting seasonal spread and based purely on winter weather. On the demand side, beef consumption is high during the winter months and this maintains a bullish seasonal pattern for Live Cattle futures. Cattle in feedlots (feeders) however gain weight only slowly during the cold of winter, so cattle slaughter remains only moderate until after temperatures warm.

Demand for feeders only seems to build as the warmer weather (mid/late April) arrives. This tends to drive the spread between Live and Feeder futures higher.

Reason for Exit:
The stop was hit. While it would be reasonable to see this spread turn higher, the market is a little too choppy and it's better to be out.

Result:
Long at -$14865 and exit at -$15900 is a loss of $1035 or 2.07% on the allocation.


Seasonal Chart and Data:

 

Current Seasonal Window:
1st Feb - 7th Mar

Historical Performance:
This trade has been profitable 14 times in the last 15 years with an average profit of $825 per spread.

Stop loss:
$900 below entry.

Allocation:
1 spread per $50,000.

Contract codes:
Live Cattle: LC (floor) and LE for Globex
Feeder Cattle: FC (floor) and GF for GLobex

More details:
www.cmegroup.com

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Disclaimer: There is a Risk of Loss in Futures Trading
DISCLAIMER HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO SINCE THE TRADES HAVE NOT ACTUALLY BEEN EXECUTED THE RESULTS MAY HAVE UNDER OR OVER COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN. THE RISK OF LOSS IN FUTURES TRADING CAN BE SUBSTANTIAL. YOU SHOULD CAREFULLY CONSIDER WHETHER SUCH TRADING IS SUITABLE FOR YOU IN LIGHT OF YOUR FINANCIAL CONDITION. PAST PROFITS ARE NOT NECESSARILY INDICATIVE OF FUTURE PERFORMANCE. THERE IS A RISK OF LOSS IN FUTURES TRADING.THE INFORMATION CONTAINED HEREIN HAS BEEN OBTAINED FROM SOURCES BELIEVED TO BE RELIABLE, HOWEVER IT CANNOT BE GUARANTEED AS TO ACCURACY OR COMPLETENESS, AND IT IS SUBJECT TO CHANGE WITHOUT NOTICE. IT SHOULD NOT BE ASSUMED THAT THE SEASONAL PRICE TENDENCIES SHOWN HEREIN OR THAT THE SUGGESTIONS REGARDING THEIR USE WILL BE PROFITABLE OR THAT THEY WILL NOT RESULT IN LOSSES. PROTRADER LLC, ITS MEMBERS OR EMPLOYEES ASSUME NO LIABILITY IN CONNECTION WITH THE USE OF THE INFORMATION CONTAINED HEREIN.