It’s been a tough year for American farmers, and maybe that’s about to change. With the Trump administration calling off the tariff dogs against China, grain prices have started to rise off their recent lows, particularly soybeans (/ZS). Beans spiked over 2% higher yesterday on the hopes of renewed exports. And that, in turn, has pulled Big Green John Deere (DE) up as well. With grain prices low, demand for DE’s products drops, too. DE’s stock price hit its lowest level in seven months two weeks ago, but has rallied over 8.8% since then, along with grain prices. DE’s earnings are coming in mid-November, and the company has met or beaten estimates in recent releases. DE’s OTM calls are trading over equidistant OTM puts, indicating that the market sees risk to the upside. That might be enough for a trader to consider a bullish strategy. DE’s IV has been rising with earnings coming next month, and its 29% overall IV and 38% IV rank are high enough to make short premium trades attractive. If you think DE might continue to rally over the next couple of weeks and are willing to take risk through earnings, the short put vertical that’s long the 462.5 put and short the 465 put in the November expiration with 24 DTE is a bullish strategy that collects a credit 1/3 the width of its strikes, has a 74% prob of making 50% of its max potential profit before expiry, and that generates $.61 of positive daily theta.
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