dirtyarbitrage

Looks can be Deceiving

Sometimes, the best trade is too not trade.  A quick note on the Lean Hogs AprJun spread as we come into Apr expiration.  Some traders look for the highly volatile trade, some want slower, more stable movement.  No matter your style, the stats always need to support your position.  Have a business plan for each trade. As you can see below, the AprJun spread has blown out to the downside.

I do not suggest being sucked into the vortex of catching the falling knife.  The stats do not support it.  Over the last 10 years, this trade is a 50/50 proposition with 13 days to expiration (DTE).  Average win is 1.72 points, average loser is 2.15 points.  This gives you a negative expected outcome of -$86 per 1 lot.  There are so many other opportunities in the universe of spreads, DO NOT COST YOURSELF OPPORTUNITY.  Never sacrifice your emotional energy on 1 position, that is a losing proposition, no matter the PnL outcome.

Hit’em Hard,

Hemi

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