Trading a Deere & Co. (NYSE: DE) Cash-Secured Put

As Kevin Cook pointed out a couple of months ago, agriculture stocks stand to benefit from the forthcoming global food revolution. One of the more high-profile names in this space is Deere & Co. (NYSE: DE), which is currently consolidating around the 50 mark after a moderate dip lower.

For investors who expect limited downside from DE, and/or those who wouldn’t mind acquiring DE shares of stock around the $45 price level, a cash-secured put could be a viable option trading strategy. Note that Deere is next reporting earnings before the market opens on February 17th.

DE Cash-Secured Put Trade Details:

DE shares are trading at $49.94, down 3.6% today.

Cash-Secured Put –

• Sell the DE March 45 put for $1.10 per contract
• Net credit of $1.10
• For every contract, set aside $4,390 in cash: [(45 - 1.10) * 100]

Securing the sold put with cash means the capital is available to buy the shares if assigned. At this point, you’ll have purchased DE shares at an effective price of $43.90, or 12.1% below their current price.

By opening a free virtual trading account with OptionsHouse, you could build a profit/loss diagram to help visualize this trade.

Profit/Loss Details:

Maximum potential profit: $1.10 per contract (the premium collected) minus commissions.

Maximum risk: $43.90 (the strike price minus the premium collected). Return on risk for this trade is 46% in 46 days.

Breakeven: $43.90 (the strike price minus the premium collected).

For more on DE:

Put strategies for Deere & Co. (NYSE: DE)

Moderate bullishness in Deere & Co. (NYSE: DE)

Deere & Co. Braces for Shareholder Vote on Executive Pay; Shares Up

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