Hog/Corn Spread: Lower the Exit, Lock In a Profit!

Lean Hog/Corn Spread

On June 3rd, The IMC blog initiated a hypothetical short position in the August-September hog/corn spread at +$14,312.50 (premium hogs). Initially, the exit strategy is to liquidate the spread on a close above +$16,100 (premium hogs).

August Lean Hog September Corn spread daily

August Lean Hog September Corn spread daily

At the end of June, the spread cracked price support at the March 23rd low of +$9,635. It made a small bounce, but petered out before getting back above the March low. Today the August-September hog/corn spread hit a new contract low of +$7,792.50.

The July 7th bounce high of +$9,377.50 and the March 23rd low of +$9,635 create a near-term resistance barrier. Therefore, we can use a breakout above this area as an exit signal to cover the short position. This eliminates the initial risk on the trade and locks in a decent profit.

Coming Attractions?

Incidentally, the December hog/corn spread crashed to a new contract low of +$2k (premium hogs). A close below the ‘even money’ mark will start whetting our appetite for the long side of the spread.

Hog Corn spread monthly

Hog Corn spread monthly

History shows that the hog/corn spread has presented some great buying opportunities after a trade below ‘even money’.  If we get there, you can bet we will have something to say on the matter.

Trade Strategy:

On the short August-September hog/corn spread entered at +$14,312.50 (premium hogs), exit on a two-consecutive day close above +$9,635.

 

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