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Beginners Board
UPDATED PRICES ON BROKENMOUTH'S FEEDER CATTLE OPTIONS TRADE
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<blockquote data-quote="ManyHorses" data-source="post: 59978" data-attributes="member: 1016"><p>Texan,</p><p></p><p>Forget about headcount... This trade is to price protect poundage growing out to sale time... same way the big feedlots do it.</p><p></p><p>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.</p><p></p><p>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.</p><p></p><p>Premium decay hopefully is mine to keep... beginning more slowly at first, the premium <u>rate of decay</u> eats away at the $1,950.00 paid by the 97 Put buyer and eventually becomes mine.</p><p></p><p>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'.</p><p></p><p>So given the costs vs. benefits, a few bucks in commissions is certainly worth your while.</p><p></p><p>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!</p><p></p><p>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.</p><p></p><p>Thanks for asking... Richard</p><p></p><p>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.</p></blockquote><p></p>
[QUOTE="ManyHorses, post: 59978, member: 1016"] 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 [u]rate of decay[/u] 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. [/QUOTE]
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UPDATED PRICES ON BROKENMOUTH'S FEEDER CATTLE OPTIONS TRADE
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