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Hi, guys. Hi from Andrea Unger and I want to introduce, now, some markets which are not as popular as the most commonly traded. But they are really interesting, so I want to explore these futures together with you.

Here we have meats. First of all, meats are interesting markets; mostly these: Live Cattle, Lean Hogs and Feeder Cattle. Be careful because you might find these on your platform with different codes. Either LE or LC, either HE or LH, either GF or FC—they are the same market, but you might have trouble if you stick to only one of these codes. In any case, that said, Live Cattle is an interesting market. Also, in case you’re not heavily capitalized to trade, of course you can trade that. But also, these with smaller, tighter stop losses; in order of $400-$500, they can work. So, you can find some interesting approaches on these markets with tight stops.

These three are actually markets that are more tradable in overnight. In intraday, it’s hard to find a good model. So, consider overnight, but again with tight stop loss—it works. Don’t forget one thing anyway. There is a problem in these markets because they change throughout the years, more than once, the operating sessions: time of the day when they were open and so on. So, when you backtest strategies, you might find some problems and go to trouble because not always you had exactly the same time that is valid today. So, you must be aware of that and consider either to place the same session valid today also in the past, or to take care of exploring all the different changes that took place throughout the years.
Another minor problem but significant in case you think this, is that they have a closing time which is pretty wide during the night. So, obviously, they can experience gaps. And not always this is a characteristic that traders like. Normally, we don’t like it at all. But let’s say that the long period of time that they are closed in the midnight might be something that is scary for many traders, considering that I said it is better to trade them with overnight strategies.

They also have some limit-up or limit-downs that stop trading, so it might happen that at a certain level you might not even place your trade, and this is particularly dramatic in case you have to place a stop loss because if you cannot exit at a desired level just because it’s not possible to trade over or below that level, it’s a bit frustrating obviously. So, this is another thing you have to consider when you think about these markets.

Another thing to consider in these 2, Lean Hogs and Feeder Cattle, is that they are cash regulated. What does it mean? It means that at the expiration of the future, they don’t knock on your door with feeder cattle on a truck and deliver it to you (they don’t do it neither with the others), but let’s say they just pay the money of the difference that you owe if you’re in a loss, or that you get in your account if you have a profit. But this create some problems sometimes because if I have open positions on Live Cattle, I can’t keep them open beyond a certain date and my broker normally sends me emails when that date is approaching (first notice, last trading day, all these things…). I get notices, I get emails. So I know and I can organize myself to roll the position into the new expiry.

For these other 2, at least my broker, I don’t know if there are brokers who do that, but my broker doesn’t send me an email because there is no problem in the settlement of the futures, because I just cash it. So, the point is that sometimes, when you have plenty of strategies working, you forget about your positions (it happened to me, twice) and you get to the expiry with an open position and you have to wait a couple of days before you get the money paid to or withdrawn from your account, for that specific position. And this is a situation where you are a little bit lost in the middle of nowhere because you don’t know exactly what to do. You can’t roll into the new expiry because you still have the open position even if it’s ended, so it’s a nasty situation, that can create some trouble, it’s not a dramatic situation, but it’s something you might be willing to consider when you trade these futures.

Another family of markets that can be handled with not an extremely large capital are Cocoa and Sugar. Cocoa and Sugar are interesting markets. Sugar is very liquid; Cocoa is not that liquid, but they are both interesting. And also, in this case, I would say that it’s better to trade them in overnight, to aim at the development of an overnight strategy. And they are also good in any case—especially Cocoa for a strategy with tight stops. So, they are good if you don’t want to dedicate a large amount of money to trading.

The same family, you put cocoa in your cappuccino, you put sugar, obviously you have coffee. Coffee is an interesting market, but it’s a very nervous market. You know that Coffee can get you nervous, so be careful about coffee. If you’re a beginner, it’s better to focus on these which are quieter, let’s say, for all the ladies—I should not say that; it’s not politically correct, but Coffee is a bit extreme. Coffee is dangerous. It’s good, also, for intra-day, but it is a market that moves very fast with very sudden strong moves, and it can be hard to manage at the starting phase of your activity in training. So, better focus on others. Consider Coffee at a later stage; it’s interesting.

Another characteristic of these three, only these three—not these three here, but Cocoa, Sugar and Coffee is that they are exchanged on the ICE. And the ICE markets, not the Globex, the ICE offers its data at a charge that cannot be waived by non-professional status, as happens with Globex. So, when you happen to require market data for the ICE, you have to pay an amount which is higher than $100 a month. So, this can compromise your plan in terms of liquidity for this market just because you might feel that it is excessive compared to the benefits you might have in trading these. So, consider that.

Also, E-mini Russell is now on that market, but we’re not talking about indexes here. We’ve talked about indexes in another video. But in any case, don’t forget that these are nice markets, but you have to pay an extra fee to get data. And it may not be something that you will want to consider at an early stage.
That’s it. Stay tuned. I’ll come back with more markets soon.

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Categories: Markets

Andrea Unger

Known as the only 4-Time Trading World Champion (2008, 2009, 2010, and 2012), Andrea Unger is a full-time professional trader since 2001 and honorary member of SIAT (Italian Society of Technical Analysis, a branch of IFTA). Appreciated author, he is often invited as a speaker all around the world.

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