Here is a recap of the “Data Feed Trade” from September 2021.
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.
Near the end of August, the December 2021 Coffee futures contract was trading sideways after a sizeable rally and subsequent sell-off in the preceding month. The trend and momentum indicators were shifting back to the upside. Only a 20-day Moving Average was down, but several others were pointed up. With a strong support level in place, sold a put to collect premium. Anticipated a breakout through a pivot point high (8/13/21). Being the Coffee market, a spread was setup to reduce the risk and margin requirement.
Trend and Momentum: Shifting bullish
Market Strategy: Write a put option to collect premium well below the current market price and support levels. Purchase a lower call to reduce risk and the margin requirement.
Recommendation: Sell the November 2021 Coffee 160.00 /150.00 put spread at 75 points or $281.25 (8/25/21).
Almost immediately after entering into the position the futures contract broke out above the pivot point high (8/13/21) as seen on the chart below. From there, the contract traded sideways for the most part and it was only a matter of time. The options expired on October 8, 2021. The full premium was collected.
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December 2021 Coffee Chart from Bar Chart: