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December Cattle-Hog Spread

The spread between cattle and lean hogs has risen dramatically on expected tight supplies of beef and an oversupply of hogs, both the November and December spreads are showing this trend. Some analysts believe hog supply is expected to continue to rise due to liquidations of inventory, while other analysts are expecting a bull market in cattle coming around the corner.  The spread has pulled back from its bullish trend, but stochastics indicate a bottom may be coming and the trend could continue.

This could be a potentially high return trade.  If indeed the spread does resume its upward trend, a move up to 45 would yield an $1800 profit (from its current price) on a contract that would require $1400-1500 in margin.

Margin Required: $1478
Target:  45 (+$1800.00)
Stop Loss: 37 (-$600.00)