Potash Corp of Saskatchewan (NYSE: POT - option chain) shares have jumped higher today after the company announced it will cut potash output in 2009 by 2 million tonnes (metric tons), or about 20%, due to weakening demand. Competitor Agrium (NYSE: AGU) also announced production cuts today, which is helping to send agricultural futures higher. Lower production levels could keep prices from falling further. If you think that the stock won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on POT.

POT opened this morning at $63.90. So far today the stock has hit a low of $63.26 and a high of $68.95. As of 12:15, POT is trading at $68.59, up 6.73 (10.9%). The chart for POT looks bullish and S&P gives POT a positive 4 STARS (out of 5) buy ranking.

For a bullish hedged play on this stock, I would consider a January bull-put credit spread below the $45 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make a 7.4% return in just five weeks as long as POT is above $45 at January expiration. POT would have to fall by more than 34% before we would start to lose money. Learn more about this type of trade here.

POT hasn't been below $47.50 at all in the past year and has shown support around $62 recently.

Brent Archer is an options analyst and writer at Investors Observer.

DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about. At publication time, Brent neither owns nor controls positions in POT or AGU.