A few weeks ago on May 26th we looked to fade a breakout in Deere (DE) and play for a consolidation above the highs with this trade:
TRADE – Buy the DE ($94.10) June 95/91/87 put fly for 1.10
– Buy 1 June 95 put for 1.95
– Sell 2 June 91 puts at .50 (1.00 total)
– Buy 1 June 87 put for .15
Rationale: Recent gaps in similar stocks have failed and consolidation has been common. This trade essentially targets a modest consolidation following the gap higher and does so with very little premium risk as the breakeven on the upside is close to where the stock is currently trading.
Since then the stock has spent most of its time consolidating but it’s had a hard time falling below 92 for any meaningful time. Our ideal spot for this stock is 91 but without broader market weakness this week we may not get that chance. Therefore we’re going to take the money and run while the stock hovers near $92.
ACTION – Sold to close the DE ($92) June 95/91/87 put fly at 2.35 for a 1.25 profit
– Sold to close the June 95 put at 2.95
– Bought to close 2 June 91 puts for .30 each (.60 total)
The June 87 puts are no bid and are not worth the commission to sell them and will expire worthless on Friday’s close.