Follow-Up to Hog Spread

June 16th, 2009 Posted in Uncategorized

I mentioned a hog spread in the previous blog. I mentioned that the LHZ9 contract vs. the LHN9 contract had widened substantially and that I'd be looking for a pullback to buy. I believe we're there.

Typically this time of year we see the LHN9 holding a 4 to 12 cent premium to LHZ9.

A couple weeks ago this spread was actually at a 4 cent discount, and has since improved to "only" a 3/4 cent premium.

I am thinking that this spread is offering an opportunity to get on in the direction of the prevailing trend. Down.

The strategy is to sell the LHN9 and buy the LHZ9 at a spread price somewhere in the vicinity .75 premium over the December. The initial risk, to me, looks like it should be about 3 cents ($1200). The profit target should be 2 cents and then 4 cents.

If things go according to plan, tighten the stop per your risk tolerance.

Call me with any questions,

Bob 1.800.388.0998 // 1.312.987.2053