SpreadEdge Capital specializes in seasonal spread trading across a wide variety of commodity markets. A spread trade is the simultaneous purchase and sale of the same commodity with different delivery dates. SpreadEdge publishes a weekly Newsletter that provides several seasonal spread trade opportunities every week.
% Carry Yield
Futures calendar curves vary in shape over time. Some often invert, with front-month contract prices exceeding those of later contracts, resulting in positive carry. Conversely, some curves exhibit contango, leading to a negative carry. Markets tend to reverse when they get at or near their highest or lowest levels over the past 52 weeks.
Below are the % carry yields for most of the for the Meats. Note that all data is based on the end of day closing prices from Tuesday of each week.
% Carry Yield Summary
- Feeder Cattle is at its highest carry yield for the past 52 weeks.
- Live Cattle is just off its highest carry yield for the past 52 weeks.
52-Week Graphs
Technical Analysis
Despite the elevated carry yields, both Feeder Cattle and Live Cattle appear to be in trouble technically. Over the past several days each market has fallen through important support levels.
How to Trade These Markets
- I opened a short Feeder Cattle calendar spread in May using the November and January expiration months which I plan to stick with. If I was opening a new position, I would use the March and April months.
- I opened a short Live Cattle calendar spread in late July that is well positioned to benefit from a decline in the market. I still like this trade for a new position.
More Information
Use coupon code “SpreadEdge” and get the Weekly Newsletter and Daily Alerts for $1 for the first month.
For a limited time, you can receive my Futures Training Videos for free with a 3-month, 6-month, or 12-month subscription.
For a FREE eBook about the SpreadEdge seasonal spread strategy.
The SpreadEdge Weekly Newsletter is published every weekend and provides a broad overview of the important seasonal, technical, and fundamental indicators within the Energy, Grains, Meats, Softs, Metals and Currency markets. In addition, spread trade recommendations and follow-up on open trades is also provided. For a free copy of the Weekly Newsletter, please send an email to info@SpreadEdgeCapital.com
Darren Carlat
SpreadEdge Capital, LLC
(214) 636-3133
Darren@SpreadEdgeCapital.com
www.SpreadEdgeCapital.com
Disclaimer
SpreadEdge Capital, LLC is registered as a Commodity Trading Advisor with the Commodity Futures Trading Commission and is an NFA member. Past performance is not indicative of future results. Futures trading is not suitable for all investors, The risk associated with futures trading is substantial. Only risk capital should be used for these investments because you can lose more than your original investment. This is not a solicitation.
On the date of publication, Darren Carlat had a position in: GFX24 , LEZ24 . All information and data in this article is solely for informational purposes. For more information please view the Disclosure Policy here.
Disclaimer: The copyright of this article belongs to the original author. Reposting this article is solely for the purpose of information dissemination and does not constitute any investment advice. If there is any infringement, please contact us immediately. We will make corrections or deletions as necessary. Thank you.
