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For: Monday 05-03-2010

Fat Margins

The beef complex along with the entire livestock complex remains firm. After a minor sell off in the that was heavily related to the stock market, we have once again seen the resilience of the market. Fat cattle margins continue to improve on pens than have been placed for summer delivery. Both June and August are at a heavy discount to cash. We will need to see how they react as expiration approaches. If we see a reversal and a break through support we will look to buy shorted dated puts.

Aggressive traders may opt to use futures. As always please consult your personal broker at Great Pacific Trading Company to see if this trade is suitable for your account.

Trade Recommendation: On a close below 9300 versus the June contract, by the end of the week, buy the June 92-88 put spread for a debit of 70 points on a limit. Risk the premium paid. (>$280 not including commissions and fees), Look to take profits if the market trades to 9050 or the spread doubles in value.