My last article related to Lean Hogs was written in early April and you can read it here seekingalpha.com/instablog/6143431-robert-edwards/1721801-i-am-long-june-lean-hogs-short-june-lean-hog-calls-for-protection. At that time I was long June Lean Hogs and was selling calls against the position. Then the June Lean Hog contract took out the 92.50 resistance level and hit a high of 92.87. However it fell back under 92 so I liquidated my longs and as the contract sold off, I bought back my calls at a profit.
When hogs bottomed again in mid April, I was bullish and I sold 84 strike July Lean Hog Puts. On strength towards 92 in the July contract, I sold 98 strike July Lean Hog Calls. Both sides remain far out of the money and I have a profit presently on both sides of the short strangle position.
Recently I have been day trading for several days from the long side and sold 96 strike calls to protect my long position if I stayed in overnight. As we recently traded up towards 93 resistance in June Lean Hogs, I took profits on my long positions and on the present minor setback, I have taken profits on all 96 calls.
I am now left with my original strangle position that continues to slowly increase in profit value thanks to time decay in the out of the money options. Right now I am short the 84 July Lean Hog Puts and short the 98 July Lean Hog Calls.
I believe that we are now approaching a time when Lean Hogs may seasonally retrace to lower prices. I am looking for Lean Hogs to top out this week and may do some naked call selling to take advantage of the anticipated dip. I will now move into the August contract to sell calls and am hopeful we might get a bit of strength in the next couple days to sell into. I will be looking at the August 96 and 98 calls to sell short. If and when we sell off and then stabilize, I hope to balance out the position again by selling far out of the money August puts.
I am hopeful that in any case, July Lean Hogs go off the board above 84 and below 98, and both sides of the strangle, the calls and the puts, go off worthless. I hope to also do the same thing with the August contract once that position is established.