Deere & Co. (NYSE: DE - option chain) shares are rising today after the company reported a second-quarter profit of $472.3 million, or $1.11 per share, beating analysts' estimates of $1.07 per share. 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 DE.DE opened this morning at $44.52. So far today the stock has hit a low of $44.00 and a high of $47.50. As of 11:45, DE is trading at $46.20 up 2.38 (5.4%). The chart for DE looks bullish and S&P gives DE a positive 4 STARS (out of 5) buy ranking.
For a bullish hedged play on this stock, I would consider a July bull-put credit spread below the $35 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 7.5% return in just two months as long as DE is above $35 at July expiration. Deere would have to fall by more than 23% before we would start to lose money. Learn more about this type of trade here.
DE has not been below 35 since early April and has shown support around $40 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 DE.
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