Monsanto Company (NYSE:MON), together with its subsidiaries, provides agricultural products for farmers in the United States and internationally. It operates in two segments: Seeds and Genomics and Agricultural Productivity.
MON has rallied sharply over the past several days, moving up from the lower end of its recent trading range at 77 to the upper end at 82. Earnings are tomorrow morning with the consensus expectation resting at $2.11 per share.
MON has rallied sharply after the last three earnings reports. Coming from a contrarian perspective, I look for MON to likely trend slightly lower this time around, especially given the recent strength in the shares. A move lower in the stock would potentially bring it back towards its 20-day moving average at $79.30.
While MON shares are not expensive from a valuation standpoint, they are also no longer cheap. Implied volatilities are not at the lowest readings, but still significantly off their highs. Sentiment is somewhat overly bullish, but not decisively so.
Given all these metrics, I look for MON to remain range-bound and drift back to the middle of the range (around $80) by May options expiration.
Based on Monsanto’s current market price of $81.80 and using a target price of $80.00, a target date of May 18, 2012, and $1,000 of investment capital, option strategies to consider include buying a put butterfly, selling an iron condor, buying a put condor, or using another options strategy that best fits your trading style and risk-return objectives.
For the full details on this trade, visit TradingBlock.com, create a free Instant Login and try the TradeBuilder feature, where you’ll see several ways to trade this name. Best of all, you can see a potential profit-and-loss outline for each strategy. Create your free login, and get access to the details about these MON options trading strategies by visiting TradeBuilder here.
As of this writing, Tim Biggam does not own any shares mentioned here.
