Here is a recap of the “Data Feed Trade” from January 2020.
The “Data Feed Trade” is a strategy to collect premium once a month to offset your monthly exchange data fees. You can read all of the details of this strategy in the following article.
In mid-January, the Lean Hogs futures market was trading near its twelve-month lows and potential support level. The technical indicators pointed to an “oversold” market. To cover the data fees for the month an April option was sold to collect premium. To reduce the risk and margin requirement a front month February option was purchased. The strike prices bought and sold were identical, the 63.000 put. However, the April futures contract was trading above the February futures contract by approximately 12.000 points. This setup the strategy to be in an enviable position on a sell-off.
Trend and Momentum: Flat and Shifting Bullish
Market Strategy: Write a put option to collect premium. Purchase a put option at the same strike in a front month to reduce risk and margin requirement.
Recommendation: Sell the April 2020 Lean Hogs 63.000 put / Purchase the February 2020 Lean Hogs 63.000 put at .75 points or $350.
Sure enough, the futures contract broke through the lows and gapped even lower due to the Coronavirus affecting China and abroad. The February futures contract outpaced the April futures contract. The gain on the February contract was more than the loss on the April contract. When the sell-off came to a halt the strategy was in a position to profit more than if the options were to expire worthless out-of-the-money. There was also two weeks until option expiration. The spread was liquidated on February 3 on negative 2.15 points for a profit of $1,160.
Subscribe to the “Data Feed Trade” service to follow a strategy that will collect premium to cover your monthly data exchange data fees. The cost of this service is $19.99 per month and factored into the premium collected, so your service fees are covered as well!
April 2020 Lean Hogs Chart from Bar Chart:
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Data Feed Trade - Receive Don DeBartolo’s proprietary strategy to pass on the data-related trading expense back to the markets. This strategy is designed to collect premium to cover the monthly data feed expense, transaction fees for the trade, as well as your monthly Data Feed Trade subscription fee!
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