March 15, 2024

FEEDER CATTLE…

GET SHORT AND STAY SHORT

What I try to do here is show you what I see…what influences my opinions…part of which is to observe how markets DO move normally …how big, how fast, how often…and what kind of dollars that translates into…

I keep noting that this market has a long history of going straight up and straight down...which I believe is related to it being a live, "unstorable" animal...and therefore think that what is about to happen here will be NO different. I am immediately looking for a TOTAL PRICE COLLAPSE HERE...taking Feeders down, minimally, to the $1.75 area, or approximately $37,500 per futures contract from here. If I am right, I’d say that there really aren’t many trades that get bigger than this. If I am wrong, you can obviously lose every dollar you put on the table…But I think the potential reward here is absolutely worth the risk.

Again, there is no other market like this live animal contract…Typically it’s pretty brutal…And my 50 year histories DO indicate that when Feeders go down, they just GO…often closing down 8-10 days consecutively…with the norm being a 2-3 month sell off of 15-20%...all of which is evidenced by the 12 declines, seen here on the charts following, during just the past 20 years.

These charts are with “Closes Only,” with a note as to how many lower and higher closes there were during the move…And DO NOTE THAT IF THERE WAS EVER A MARKET THAT CAN BE DESCRIBED AS HAVING A TENDENCY TO “GO STRAIGHT DOWN,” THIS IS IT.

AND WITH FEEDERS COMING OFF OF THEIR ALL TIME HIGHS, I FULLY EXPECT THEM TO DO SOMETHING SIMILAR TO WHAT YOU CAN SEE ON ALL OF THESE CHARTS.  

One more time…Do note that “straight down” DOES describe the way Feeders DO move when they are declining…

Here are a few options I’d recommend here…Also to note that these options trade right up to the day that each contract goes off the board. In fact, you don’t even have to get out of them as they are cash settled on their last trading day.

I DO think this recent sideways action is an indication that Feeders are about to roll over hard…that this is about to happen NOW…and would basically recommend buying both the May and August Puts as one “unit.”

 MAY 2024

AUGUST 2024

LOTS of ways to go about this…Call me if you want to know more…

Bottom line is, as always…Buy the puts. Forget you own them. Check back in 2-3 months…FOR REAL.

Thanks,

Bill

770-425-7241

866-578-1001

All option prices in this newsletter include all fees and commissions. All charts, unless otherwise noted, are by Aspen Graphics and CRB.

The author of this piece currently trades for his own account and has a financial interest in the following derivative products: Feeder Cattle