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What Mad Cow maketh, the Mad Cow may taketh away
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<blockquote data-quote="ManyHorses" data-source="post: 69769" data-attributes="member: 1016"><p>Buying calls in this kind of market atmosphere is highly speculative and would not serve to manage either the risk you currently have, or the risk your herds are growing into in terms of tonnage. In fact it would only increase your risk.</p><p></p><p>Buying an March 100 put for $750 would give you protection on 50,000lbs of feeder cattle for the next 44 days. Very cheap insurance and your total risk is limited to the $750 premium you paid.</p><p></p><p>Still better would be to Buy an April 100 put for $750 and sell two April 94 for $300 each. This makes your cost of entry only $150 plus commissions. Again this would give you 50,000lbs of protection for the next 44 days. Your risk would be if the market broke below 94.</p><p></p><p>This trade is very similar to the March 102/97 trade I posted back on December 27th. It is still a good trade today and I continue to carry it today in my own portfolio with a $612 profit as of todays close... I still have another $600 in premiums due to me... and I still have good profit potential on the 102 put should the market trend to the downside.</p><p></p><p>This trade is not about speculation, it is about risk managagment. The bottom line is to talk to a good broker who specializes in cattle. </p><p></p><p>Richard</p></blockquote><p></p>
[QUOTE="ManyHorses, post: 69769, member: 1016"] Buying calls in this kind of market atmosphere is highly speculative and would not serve to manage either the risk you currently have, or the risk your herds are growing into in terms of tonnage. In fact it would only increase your risk. Buying an March 100 put for $750 would give you protection on 50,000lbs of feeder cattle for the next 44 days. Very cheap insurance and your total risk is limited to the $750 premium you paid. Still better would be to Buy an April 100 put for $750 and sell two April 94 for $300 each. This makes your cost of entry only $150 plus commissions. Again this would give you 50,000lbs of protection for the next 44 days. Your risk would be if the market broke below 94. This trade is very similar to the March 102/97 trade I posted back on December 27th. It is still a good trade today and I continue to carry it today in my own portfolio with a $612 profit as of todays close... I still have another $600 in premiums due to me... and I still have good profit potential on the 102 put should the market trend to the downside. This trade is not about speculation, it is about risk managagment. The bottom line is to talk to a good broker who specializes in cattle. Richard [/QUOTE]
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What Mad Cow maketh, the Mad Cow may taketh away
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