Market Vectors Agribusiness ETF (NYSE: MOO)

Overview

Options trading investors looking for Agriculture sector exposure should consider this exchange-trade fund.

The majority of MOO’s Ag sector weightings are in materials and consumer staples and most of the market cap holdings are large cap. The United States represents about 45% of the ETF.

Names in this Ag/Fertilizer group have recently traded lower, but we believe data and demand over the next few months point to a positive return for the sector.

Options Trade – MOO Vertical Put Spread

With a trading price of 53.00, an investor could sell the MOO June 50/55 Vertical Put Spread for $2.50, as the spread is established for a credit to the seller (when selling a higher strike put and buying the lower strike put in the same expiration). In this trade sell the June 55 Put and buy the June 50 Put. Check the option chains for current prices.

Find more option analysis and trading ideas at Options Trading Strategies.

This strategy has a bullish outlook. The strategy has limited profit – the $2.50 credit earned on the sale; and a known maximum loss – $5, the difference between the two strike prices.

Since the strategy is bullish the investor benefits in a rise in MOO’s price. However, should the stock trade lower, the breakeven for the strategy is $52.50 ($55.00-$2.50) in the MOO price at June expiration.

The ETF could trade down and be put to trader at $55.00. With the premium of $2.50 collected, the effective buying price would be $52.50. That’s a price we are comfortable paying for MOO.

Stutland Equities is a premier futures and options trading company on the Chicago Board Options Exchange. Founded in 2005 and headquartered in Chicago, Stutland Equities specializes in volatility arbitrage across multiple asset classes.