UPDATED PRICES ON BROKENMOUTH'S FEEDER CATTLE OPTIONS TRADE

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ManyHorses

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Since setting up the trade and based on Wednesday December 29th closing prices...

March futures have DECLINED 3.69 cents or .........$1,845.00
March Options Protection Position DECLINED........... $112.00
Net Protection offered towards Cash Market.....$1,733.00

Again, this kind of position is to 1) offer price protection against cattle inventory and 2) protect its own position against loss.

It offers the local producer the ability to do on the CME what he can't protect himself against locally.

Richard
 
Richard, as you are well aware, the only sure thing in futures and options is the accumulation of commissions and fees to our account. The more we try to protect previous postions, the more of those we accumulate. Why don't you give us all a little insight into those numbers?
 
Texan,

Commision costs depend a lot upon the type of account you need. A full service commision broker may charge as high as $75.00 plus exchange fees. Personally I average a little less than $40.00 commissions and fees per option because I don't require much broker support. I could probably get by paying less but I like having extra broker support in the 'wings' for his access to data and entering complex trade instructions.

USE ONLY AN EXPERIENCED BROKER WHO EATS AND SLEEPS CATTLE, HOGS AND MAYBE THE GRAINS... NEVER SPECULATE!!!

The cost to set up this trade was about $120.00 plus exchange fees.

The beauty of having to adjust this position and pay additional commisions would be because I'm making too much money... i.e. if futures were to appoach my 97 Puts I'd move 'em down a couple cents but that would also mean that my 102 Put has become more valuable to the upside.

If futures were to roll over my 102 I'd probably just set a bit because the 97's I had sold had become less valuable and I'm at a profit with them...

Bottom line is that commissions aren't much concern to longer term position traders where you're after much larger returns.

Hope this helps... Richard
 
ManyHorses":10pfl6j3 said:
Bottom line is that commissions aren't much concern........
I'm getting a little confused, Richard. Maybe you can help me out. I thought we were in this to scotch the position we have by already owning cattle? If commissions were almost $2/hd just to set up this one trade, that could get into big money quick for most cattlemen if we keep on covering different positions. Many of us jump at the chance to cut annual cow costs by 50 cents a head. If you can't understand the importance of that, you and I don't even speak the same language.

ManyHorses":10pfl6j3 said:
.......to longer term position traders where you're after much larger returns.
This is where you add to my confusion. Are we now "longer term position traders........after much larger returns?" That sounds like a spec trader to me, not a cattleman. I know I'm repeating myself, but I thought we were in this to hedge the position we already hold by owning cattle? We're not after "much larger returns." All we started out wanting was to manage our risk. We're cattlemen. Remember? You make it sound more speculative. In spite of your constant warnings.........
ManyHorses":10pfl6j3 said:
... NEVER SPECULATE!!!
 
big chief manyhorses speak with forked tongue . he loco. he talk much smoke but no show fire and take heap big loss befor many moons
 
Texan,

Forget about headcount... This trade is to price protect poundage growing out to sale time... same way the big feedlots do it.

Brokenmouths trade is set up to do two things; first to offer price protection against a present cattle position, and second to make money. This is done in two ways, price appreciation of our 102 and premium decay of the 97's... these can operate independent of one another.

Price appreciation of the 102 means FC futures prices decline thereby increasing the value of the 102; closing just above 97 would be optimal giving 5 cents protection towards the March cattle position which the cattle are being grown into.

Premium decay hopefully is mine to keep... beginning more slowly at first, the premium rate of decay eats away at the $1,950.00 paid by the 97 Put buyer and eventually becomes mine.

Assuming futures prices declined to 97 to protect our cattle, and I held my 97 till expiration, I be getting $2,500 (5 cents x 50,000#) plus the $1,950 premium on the 97's... totaling $4,875.00... which protects me against the first nearly 10 cent market decline in my cattle 'on the ground'.

So given the costs vs. benefits, a few bucks in commissions is certainly worth your while.

Regarding your question on 'speculation'.... notice how I keep my position constantly hedged against itself. If I were to get greedy and take off one side or another then I'd be into speculation because I'm then saying I know which way the market's going... it may be true but then it may not be true... I don't speculate!

Note: The best traders in the business only average about 50% right/wrong trades... but the ones their 'right' on, far outweight the ones their 'wrong' on... no different that buying and raising cattle.

Thanks for asking... Richard

PS... Google on 'CTA performance' and you should be able to pick up on performance ratings for registered CTA's... kinda like checking on EPD's.
 
Rumors of another case of Canadian Mad Cow disease broke Feeder Cattle prices again to the downside... Bush still going ahead with opening the border...

My safety kicked in and my 97's were 'stopped out' and will move 'em lower....

Back to ya later after the dust settles and the market closes...

Richard
 
ManyHorses":1vyxlmay said:
Forget about headcount...
We can't do that, Richard. We're cattlemen. You seem to keep forgetting that. When most cow-calf producers figure costs to determine revenue, we use averages based on head counts. I used the $2/hd on that first setup as an example to show you the difference between you and I. Those commissions expressed in a lump sum don't sound like very much money to you high-rollers. You traders probably spend that on lunch. But that sum translates into per head costs for us. Those are the costs that determine profit or loss for us.

ManyHorses":1vyxlmay said:
Premium decay hopefully is mine to keep...
Assuming futures prices declined.....
I added some emphasis to a couple of your words here. You know, hopefully, we could assume that we will have advancing markets and won't need any protection at all.

ManyHorses":1vyxlmay said:
So given the costs vs. benefits, a few bucks in commissions is certainly worth your while.
All of those benefits you keep talking about are based on your hopeful assumptions, aren't they? The commissions are our's to pay regardless, right?

ManyHorses":1vyxlmay said:
.... notice how I keep my position constantly hedged against itself.
Yes, I notice that. I also realize that you continue to accumulate commissions and fees with every new position. More dollars per head. One thing doesn't change---the only sure thing are those commissions and fees. In my opinion, those are just added costs of production that you're advising us to incur.

ManyHorses":1vyxlmay said:
Note: The best traders in the business only average about 50% right/wrong trades... but the ones their 'right' on, far outweight the ones their 'wrong' on... no different that buying and raising cattle.
Richard, that's a helluva lot different than being in the cattle business! Cattlemen that make their living in this business aren't satisfied with a 50/50 proposition. So the "best traders in the business" are only right half of the time, huh? Why would I want to bet my money against their's?
 
mh the market closed you didnt come back. where you been. digging out of your hole or adding anothr chapter to your book

when you placed your orders you forgot to mention any stops. been wondering howd you put stops on options that your short on. thats awful tricky especially after the fact. was your broker ok with that .

when you moved your 97s lower you had to pay commisssions on the buybacks plus commissions on the new short sales. on top of that whey you bought em back you paid twice what you sold em for.

dont forget to tally all that in
 
brokenmouth...

I've been trying hard to avoid you, but being your ingorance and illiteracy is everwhere, so I'll just have to shovel you up one more time....

Last time I looked:

Your cattle were down about 6 cents for a $3,000.00 loss
My March 102 was up from $1,887.50 to $3,562.50 for $1,675.00 gross profit less commissions to move the 97's down


Now while you're sloggin' though your cows***... I'm going back to playing golf in sunny Phoenix, AZ with some of your money.

Happy New Year brokenmouth... Richard
 
you aint golfing on my money cause if you had a lick of sense youd know I aint ready to go to market yet. I aint lost nothin. Im still long on good sound calves . Yep youre genius dont apply to mE anyway cause if you remember my calves are still 350-400 so I got lots time left to make decisions. Mean time you already got your smart self in a big bind with your keyboard cattle which is obviously the only kind you run

you aint golfing on my money. some chicago boy is wining and dining his girl on your money

ManyHorses":39x41726 said:
My March 102 was up from $1,887.50 to $3,562.50 for $1,675.00 gross profit less commissions to move the 97s down[/b]

you point to my 'ignorance and illiteracy" but I point to how you cant add and subtract. nOt much of a math miNd for such a financial genius.. youre leaving out your loss on the puts that you wer so smart to short . gotta count everything whiz kid. You dont get to just count th e part you like to think about. So $80 buy back plys 80 to sell short again (called chasing the market) on top of $1,950 loss on replacing your 2 shorts = $2110. where I went to school 2,110 loss and 1,675 profit means your $515 in the hole

not bad for one days trading huh hotshot. I might be ignorant but I aint dumb and I aint a sucker. And I sure aint illiterate cause i can read the options quotes and keep you honest.

http://www.cme.com/trading/dta/del/dela ... ctType=com

keeping you honest is turning into a full time job .
 
You guys are helping me understand that I do not want to mess with options and all of that stuff. I will stick with my cows, that's what makes me happy!
 
ManyHorses":9dlmamo7 said:
Now while you're sloggin' though your cows***... I'm going back to playing golf in sunny Phoenix, AZ with some of your money.

Sometimes a whole lot of cows*** is preferable to a pile of bulls***!!!
 
Oldtimer,

You just remember that guys like me are selling down your cattle... I can control whole herds off my keyboard without the months of effort and risk you take to produce 'em.

So the next time you get to 'bitc*** about prices, remember what I offered to you...

Richard
 

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