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. % Carry yield is the one-year calendar curve yield as a percentage of contract notional value. 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 and Live Cattle are at their highest % carry yield for the past 52 weeks.
- Soybeans and Soybean Meal are at their lowest % carry yield or the past 52 weeks. Corn is near its lowest.
52-Week % Carry Yield Graphs
Further Analysis
Between these 4 markets, Live Cattle appears to be the best opportunity for a spread trade.
Live Cattle broke through the bottom of the upward channel earlier this month. LC has attempted to retest but I expect this to fail.
How to Trade These Markets
- 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.
Note that the December, April spread has a 4-month gap between expiration months. For a less aggressive option, I also like the December, February calendar spread that has a 2-month gap.
More Information
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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: LEZ24 , GFX24 , ZMZ24 , ZSF25 . All information and data in this article is solely for informational purposes. For more information please view the Disclosure Policy here.
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