it caused me to reflect on what I will call, for lack of a better term, "Conventional Wisdoms".

Wisdom #1. The old Danish Proverb that says, "Never make a prediction, especially about the future." But that is what we do all the time. It is the very nature of this business of futures trading.

Wisdom #2. There is more than one way to skin a cat. As I watch your fishing trades, you seem to look for the market starting to make a move and jump onto the momentum that is being generated. I tend to follow a "Trend-line Reversal" approach. You are looking for the big move that is being generated. I'm looking for the suckers you throw back.

Wisdom #3. Price is determined by supply and demand. This is a great truth but the problem is that price is often set by the time we can figure out the supply/demand equation. Of all the markets out there, the supply/demand data available in the hog market is far superior to that available in any other market. But the data we get today has relatively little relevance about the price of hogs in August of next year. On the other hand, it has a great deal of relevance relative to the price at which the ZZZs will go to cash settlement. I have found my Hog Pricing Model to be quite a handy tool for trading the front month futures during the last ten-days going into cash settlement. This is when I do my very best trading.

Wisdom #4. Never, NEVER, EVER sell naked options. This is based on the notion that there is un-limited risk and I suppose there is. But the risk of selling a naked option is just the same as buying or selling a future. The thing that is different is the win/loss ratio. When it is a future, there is the chance for both unlimited loss and unlimited profit. With an option there is limited profit potential and unlimited loss potential. I sell naked T-Bond options by the dozens all the time but I have not yet been able to successfully sell hog options. As I look at the hog market right now, though, I am contemplating selling a December 50 or 51 put because the supply/demand data seems to be pointing "UP" in the very near term. No way would I consider selling a naked June option! If I were a producer, I would consider selling a naked June 90 call, though.

Wisdom #5. "Ya Gotta Know the Territory" is from the opening scene of the movie THE MUSIC MAN and it applies in a very big way to the hog market. I feel somewhat handicapped in trying to match wits with the packers. I believe their information source is far superior to mine and that is a fact that I just have to live with. I suppose I don't have to be better than the best just better than some.

Wisdom #6. Losing is a part of winning. No one can know exactly what the future holds and so there will be losses. When they come, gird up your loins and keep on keeping on. It is needful that losses be contained to the point that one is still in the game.

What does all this mean?

Not much but it does cause me to review some of my under-pinnings and prepare for the new day.

Best wishes,

dhm
becuse