Alex Bobrov
Options news. Such tool as Live cattle has been traded within a bullish trend for over two years, consequently, selling put options at the market is very profitable, as one can earn high profit.
There is a fundamental explanation to the rising trend – this is the smallest number of livestock heads in the USA since 1952, and it will not rise in the nearest future, as calf fertility also shows negative dynamics.
Shortage of herd is caused by a number of reasons: firstly, high price of feed crops; secondly, drought during the summer of 2011 has had a negative influence of livestock, as farmers had to slaughter the cattle that failed to reach optimal weight, which lead to higher loss.
In addition to shortage of livestock heads, price is supported by high demand for North American beef (during 2011 this factor has risen by 21% in comparison to previous year); in this reference, import, on the contrary, has been reduced.
Moreover, in addition to long-term factors, there is a number of short-term factors that keep price from rising: this is a shortage of feed livestock, which will further lead to shortage of production and, consequently, to the new price rise.
Therefore, the abovementioned reasons will hold the price from considerable decline, and any size of it will only be a correction to rising trend. Consequently, this may be positively used for selling option puts.
Selling option puts with a strike of 112 on December 09 may be an example of such transaction; recommendation to it has been given during one of the closed meetings of the Department of Derivatives Trading within Masterforex-V Academy.
Highly professional analysis of larger quantity of tools, which is conducted by the department, enables choosing the best options at a certain point. This almost totally eliminates the possibility of negative result of transactions.
Alex Bobrov
