Play ADM Calls

Cancel FCSX (For Now)

By Bryan Bottarelli
Monday, January 28, 2008 2:14 PM EST
Mon, 28 Jan 2008 19:14:00 GMT

PLAY: Buy the ADM March 45 Calls (ADM CI) at or under $2.15, good for the day.

Dear Bottarelli Research Member,

First and foremost, let’s go ahead and cancel our order on FCStone (FCSX – NASDAQ).I really like the chart set-up, but we never got the opportunity to enter the FCSX March 45 Calls (QGD CI) at or under $3.20. Therefore, let’s cancel this order (for now) and look to revisit the play if FCSX trades lower later in the week.

FCSX

But in the meantime, let’s replace this trade with another very interesting upside opportunity. Here’s the backdrop: Even though we’ve been successfully playing agriculture and fertilizer plays like Potash of Saskatchewan (POT – NYSE), Mosaic (MOS – NYSE), and Bunge (BG – NYSE) for the better part of a year, it’s now apparent that every recreational day trader is now an expert in the agriculture business – and as a result – the options premiums on all of the stocks listed above look un-naturally high to me. Therefore, I’d like to stay one step ahead of the crowd by actually taking a step backwards and re-visiting a company that started this whole agriculture boom. Headquartered here in Decatur, Illinois, I’m talking about good old Archer-Daniels-Midland (ADM – NYSE).

ADM

As you can see from the chart, the stock looks poised to make a run at its $47.00 high – and unlike other agriculture plays, ADM’s options are dirt cheap. Take, for example, the options premiums on fertilizer company Terra Industries (TRA – NYSE). The TRA March 45 Calls (TRA CI) are trading for $5.30 per contract. Now, compare that to the ADM March 45 Calls (ADM CI), which are only trading for $1.95, and the value proposition becomes very clear. Although TRA and ADM are both $45 stocks, there is a 171% price difference on their March 45 calls! To me, this makes a strong case for the ADM calls. Combine that with a stock chart that looks ready to extend upon its gains, and that makes for a trade. Let’s get positioned now!

PLAY: Buy the ADM March 45 Calls (ADM CI) at or under $2.15, good for the day. Place a protective stop limit at $1.10. And of course, continue to adhere to our “sniper” profit-taking mentality.

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

© 2012 CSR Group, LLC. All rights reserved. Published in USA.

Information, opinion, research, and commentary contained herein is obtained from sources believed to be reliable; their reliability, however, cannot be guaranteed. The maxim of Caveat Emptor applies — let the buyer beware. Bottarelli Research does not provide individual investment advice, act as an investment advisor, or individually advocate the purchase or sale of any security or investment.

Investments recommended in this service should be made only after consulting with your investment advisor, and only after reviewing the prospectus or financial statements of the company. Bottarelli Research reserves the right to use e-mail endorsements and/or profit claims from its subscribers for marketing purposes. All names will be kept anonymous and only subscriber’s initials will be used unless express written permission has been granted to the contrary.

CSR Group, LLC expressly forbids its writers from having a financial interest in any security recommended to readers. Furthermore, all employees and agents of CSR Group, LLC and its affiliate companies must wait 24 hours before following a published recommendation.

Bottarelli Research alerts contain time-sensitive information, and are published and distributed to members with urgency. Because of this, not all published materials can be adequately proofread, and an occasional spelling or grammar error may exist.


Other Options Alerts From January 2008