Option Trade 2/14/2020

Buy April 54 put @ 1.525
Sell April 52 put @ 1.10
Sell April 51 put @ 0.975

Total Credit $220.00 less $12.15 commissions for a profit target of $207.85
Suggested account size: $2,000.00
Targeted Returns: 10.4%
Trade duration: 73 Days Age of Trade: 18 days
Results to 2/20/2020: +$157.85 = 7.9% gain.

Comments: Thursday the April futures dropped -0.700 and this trade coughed up ten bucks of its gains dropping the gains to date to $157.85 for a 7.9% gain for the account in 18-days. The margin requirement for this trade had dropped below $500.00 so I have started building a May trade by selling a naked 66 put at 1.575
I now intend to buy a 68 put for something like 2.00 then sell a 65 put. The margin has now moved up to $1,630 so I need to buy the 68 put before selling the next may put.

We know there is always a seasonality high and a seasonality low in the hog market. We are now in the chase looking for the seasonality high for 2020.

The May futures settled premium to the component by 18.54. The numbers seem to be hinting that the kill rate is going to be slowing down over the coming weeks and packers are now beginning to bid a little higher.

My perception is the risk of selling naked May 66 puts is not very great and defense is quite easy in the event the market moves against the trade. I suppose Liquidity in the May options could be a problem.

Best wishes,

Doc