Last week Deere dipped on a lousy earning's report but rebounded. I wasted part of last Friday watching the stock going up, to timid too play it for the upside and yet smart enough not to try and play it to the downside. Deere afterall is 68.58% owned by institutional investors who pay big bucks to get the best and the lastest insider's reports. They were told the stock should go up. Here is a five day chart as of February 18th around 11:00 a.m. which is now two trading days after last Friday's big rally. The stock continues to go up.
. How lousy was it? It was really bad. Caterpillar also recently had a really bad (not just poor) earning's report. The economy is on the verge of a recession. Farmers are not buying tractors. Read this.
Scary stuff right? Sales down 30% year over year. "A shaky backdrop for consumers". Shaky is not an inspiring word for an executive of the company to be using. With new tariffs on the way and steel prices on the verge of costing more (they are a big user of steel to build things) their near term future looks bleak. Last Friday I watched the stock jumped up in price as the "one-day-expiry" Put options got beat up and the one day Call options jumped to the moon. This is difficult to read but it shows $.01 Call options jumping in price to $1.31 and then even higher. (I checked with the Yahoo site and the $.01 readout my brokerage company was reporting was a mistake. They seem to have a habit of reporting the wrong lows of the day.) Then on Friday at 1:06 p.m. yet another report came out. You can read it below. It talks about good times ahead. Who do you believe? Some writers have a knack assessing the mood of the day and write what people want to hear.
This report might seem to be positive but commodity prices are still down and farmers might hope just to break even in 2025 and part of this hope comes from the government bailing them out. You you think that is going to happen? Now this at 12.18 p.m. on Tuesday. When will this upward movement come to an end? It's up almost $14.00 dollars on the day at this point in time. Yet wait, the stock is getting very close to the $500.00 level. That's now where it sems have a predisposition to go. Start pouring the champagne.
So here we are now at 1:57 p.m.
A dip in the chart after 1:00 p.m. in the afternoon. Here now are two things I want to point out. First look a how the Puts instantly became defensive in their pricings. Look at the wide spreads between the "bids" and the "asks" on all three of these series of Puts. If you want to get out on a dip be prepared to get a haircut. A spread for example of $1.20 on the "bid" and "ask" on the $492.50 series of "Puts".
Why is this? Well option makers know that if a stock like this drops two or three dollars it could very quickly drop four or six dollars. Also note the volume of trading that is suddenly coming into these Puts. Now look at how Deere closed out the day. It did reach the $500.00 mark.
Here now is its five day chart.
Here is how these three series of Puts closed out the day.
Deere closed the day at $501.56 and the number of open Put contracts has increased substantially. I think this stock has now gotten ahead of itself. Going into the Wednesday, February 19th premarket it's pricing is off a touch.
Would now be the time to be looking at it's Puts? Look at this. The 500 series of Puts going into Wednesday morning cost $400.00 and the the open interest number was 80. Trader's in general are hesitate to fall into this potential trap.
In contrast, look at the open interest numbers in the Calls, 686.
Wednesdays can be the day of option reversals for options that expire at the end of the week. The bottom line is that it's best just to stay away and do nothing or buy a 495 (s) Put (s) for next week and hope that the stock drops $20.00. But what do I know? It might still want to go higher. There are easlier options to play. I blogged repeatedly in the last 30 days about buying Walmart Calls for one day upward moves given that the striking prices are set up in one dollar increments. That gig may now be over. Keep reading these blogs, there will always be more new opportunities to discover.*** A Feb 20th update. Timing is eveything. Yesterday was a strong trading day to the upside and today a swing to the downside. I was off one day in my timing.
** Here now is how the 500 series of Puts closed the week.
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