Deere & Company (DE) Bull Put Spread

The recovery is on, at least according to some. Commodities have been in the spotlight and if you believe in the global recovery and increased demand and prices, Deere & Company (NYSE: DE) may stand to benefit. U.S. manufacturing numbers were strong as well as factory orders today, topping analysts’ expectations.

Certainly the good news must be balanced with the 16% plunge in housing, but also remember that this is typically the slow season for housing and that sector certainly has its issues. With that said, DE should benefit from both an increase in prices of commodities in general (mainly the softs, but this stock tends to react with others as well) and with an increase in global demand for its products. DE also has its hand in renewable energy, which becomes more viable as the price of oil climbs. Do not forget that DE has a presence in China as well, which many are calling the epicenter of global growth today.

DE Credit Spread Trade Details:

DE is currently trading at $55.70.

Credit Spread/Bull Put Spread–

• Sell the February 55 put for $2.18 per contract
• Buy the February 50 put for $0.72 per contract.
• Net credit of $1.46

Profit/Loss Details:

Maximum profit: $1.46 (the credit collected).

Maximum risk: $3.54 (the difference between strikes minus the credit collected). Return on risk is approximately 41.2%.

Breakeven: $53.54 (the strike of the short put minus the premium).

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