Equity Overview: Corn Products International (NYSE: CPO)

Corn Products International manufactures and sells food ingredients to food and industrial customers in North America, South America, Asia, and Africa.

CPO recently reported first quarter EPS of $1.28 versus $0.89 a year ago, and sees its FY2011 EPS of $4.85 — $5.15, versus the analyst consensus of $4.10.

Both the 50-day and 200-day moving average are rising which appears to be a bullish signal. Analysts have raised their rating and price targets for CPO as a result, supporting shares to a recent high of $57.91.

We believe the stock will continue to perform well but see some limited upside and would consider a limited risk and profit potential strategy.

Options Trade – CPO June Call Spread

With a price of $ 54.60 we would consider buying the CPO June 55/60 Vertical Call Spread — that is buying the lower strike for $1.50 and selling the higher strike for $0.40, or $1.10. Check option chains for current bid/ask prices and last sale data.

The strategy has known risk and profit potential. The risk is the amount paid for the spread which is $1.10. The maximum value of the spread is $5, the difference between strike prices. That means the maximum return on the spread is $3.90.

The spread has a breakeven price of $56.10 (55 strike + $1.10 = $56.10) at June expiration. Should the stock not meet our expectation by June and trade lower than the breakeven price, our exposure is $1.10, the amount paid for the spread.

With recently traded stock highs and given our outlook, buying the vertical call spread allows us to have defined risk and defined reward exposure.

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.