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Title: Message
Unfortunately, no markets are immune to these types of extreme events.
Taleb refers to them as 'black swans'. They're much more common than most people
and statistics assume and totally unpredictable. I'm not 'in the
know', but I think it comes with the territory. Trading futures is very risky
because of the leverage. At least cattle has a daily limit, so you know you
can't lose more than that in a day;) Although you might not be able to get out
and suffer even more limit moves against your position. Personally, I don't
trade markets with limit moves because I always want the option of being able to
get out if I want. I got trapped in lumber once and I've never traded another
market with daily limits again. I hated feeling totally helpless, sitting there
hoping that the market will come back just so I can get out. It was awful. It
wasn't even a lot of money, but I don't ever want to feel that way again.
Trading is risky enough, why add to it by getting into market where you might
not be able to get out. Plus, I think those limits are like magnets. They're
like sitting targets and those markets want to test them. In your
situation, you could hedge with an option. But, do they stop cattle option
trading during limit moves? Other ideas: trade less size, trade other markets in
addition to cattle to diversify. I hope this helps.
Trey
Sorry for the "no
text" email...don't hit return when you are still typing the
"subject"...
For background, I trade 100% futures and 0% stocks,
mostly because of the leverage. I made a little during the last run-up
in the stock indexes by staying long the s&p emini, but do mostly hard
commodities, occasionally interest rate or currency futures.
If
there are any live cattle future traders out there, I'm curious as to whether
you have found a safe way to trade in these days (almost a year now) of "mad
cow disease" scares. Today for the 3rd time (if last summers 2
back-to-back positives on preliminary tests can be counted as one time) in the
last 12 months, being long the live cattle market as been hazardous to ones
financial health, although patience would have eventually paid off in
both previous cases. Do any of you who are more "in the know" than I am
still trade the meats, or have you just backed off and gone on to other
markets.
Specifically, I trade intermarket and calendar spreads,
and right now is a seasonally good time to be long Feb cattle and short Feb
hogs. Trouble is, a preliminary positive mad cow test makes that
strategy very short term painful. Any comments?
Larry
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