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Large Volume Trade Noted Yesterday in Hog Puts

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Thursday October 12, 2017


Nothing much to gleam from volume and open interest. Hog volume on the rally yesterday was moderate at 42,100 with open interest up 340. OI in Oct was down 1,100, up 1,100 in the Dec, down 1,200 in the Feb and up 1,000 in the Apr. This information does not tell me much. What did happen was most active Dec rallied to resistance but did not penetrate. What occurred as a very active trade in hog puts. Total put volume of trade was 11,000 compared to just 3,300 calls. The most actively traded put was the one were purchasing, the Dec 56 put which saw volume of 2,050. The Dec 50, 52, 54 and 60 put also saw good volume of trade. Consider this the hedging and possibly some fund activity positioning from the short side. The kill was consistency large at 463,000 with cutout remaining stable. Look for a choppy two-sided affair again today. Oct goes off tomorrow with the latest index at 5832. The Oct looks to expire higher than what we expected as the cash market continues to edge higher daily. A seasonal top is due now. In our opinion the weight of record large pork, poultry and beef production will eventually force prices back to a test of the Sep lows. The Dec 56 puts settled at 90, we got filled buying these at 85 and at 90 points.


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The delivery game has started with 16 total against the Oct which includes 14 retenders coming back from yesterday. The oldest long is creeping upward and now stands at Aug 29th. Theres no strong bull or stopper in the Oct. LC futures have rallied this week off speculation that cash steer prices will rise again this week. This simply has not occurred, at least thus far. Most active Dec formed a doji pattern yesterday which Id consider a dangerous pattern likely to trigger or signal a top. The kill looms large coming in at 118,000 yesterday and the wholesale beef appears to be weakening. Weve noticed that feeders appear to be losing their bull leadership. FC have consistently been out-performing the LC in recent weeks. This week feeders appear to be weakening even as the LC continue to trade firm to higher.

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About the author

Dennis Smith has been a full service commodity broker specializing in grain and livestock trading for over 25 years. Dennis has a wide range of customers, many of whom are grain and livestock producers. Dennis develops and helps execute hedging and speculative strategies in his Daily Livestock Wire which is prepared each afternoon exclusively for his customers.

Dennis grew up in Central Illinois before launching his brokerage career.

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