there are probably not that many trading the cattle/hog spread so those that are probably aren't responsible for making the needle move. The strong seasonals for June cattle to go down have traders short June cattle and the strong seasonals for June hogs to go up have traders long June hogs. This is why I prefer to leg in by using potential support areas to buy June hogs and potential resistance areas to sell June cattle.
It is too difficult to pinpoint with accuracy where the high end of the spread will be, as well as the low end. During the process of spread price discovery I treat both sides as separate trades because the margin is the same as 2 separate trades. Once I get a likable spread working in my favor I always use a $3 Damage Control to manage my risk. When the spread start narrowing to my guess area, I start looking at the support targets for downside on the cattle and also the resistance targets for upside on the hogs. I usually just make my spread deposit with a spread order at the desired spread price.
Some years one side of the spread will have dramatic moves with high volatility as the spread starts the narrowing process. These types of years I will leg out of the poor preforming low volatility side and let the active leg keep seeking the directional price discovery. This is why I try to grab one of these spreads every year. I don't know if the cattle or the hogs will have a wild directional move or if neither happens. If I have the spread, the market will tell me which one to hold and which one to fold. Whatever makes that needle move is fine with me, I just know that it moves, and is as solid of a winning spread trade that I know of that will bring in a $10+ deposit year after year but it does take a sizable investment to margin.
Since I get short June cattle and long June hogs in this seasonal timeframe every year anyway, I find myself automatically with this spread whether intentionally or by accident. I also use my past experience of trading this spread as a guide. Things didn't line up right for the hogs after I had been short the cattle twice. I was doing fine fishing so I decided I wouldn't chase this spread. Things did line up perfectly for the cattle rally taking place and I didn't hesitate to make my choice to grab 3 long positions on the June cattle.
At the moment I feel very good about being long June cattle rather than short but there's a problem starting to set in. I also made a nice deposit from the south line hit on June hogs this morning. Here's the problem-----it's been such a good Monday------- I can feel my head starting to swell. That tends to lead to problems if I don't keep it under control. I have to keep reminding myself-----I'm not the genius I feel like at the moment--------I'm just a LUCKY IDIOT that finally had a good Monday morning stroke of LUCK