Option Trade - Monsanto Co. (MON)
Thursday July 19, 2012

**OPTION TRADE: Buy the MON Jan 2013 87.500 call (MON130119C00087500) at or under $5.80, good for the day. Place a protective stop limit at $2.50 and a pre-determined sell at $10.00.

by Ian Harvey


With commodities like wheat and corn rocketing higher of late, agriculture-related stocks have quickly become leaders in what many would consider a rather lackluster market. With the ag space catching fire, it’s not surprising that it’s outdistanced itself from the broader market, as shown in the comparison chart below.

While the S&P 500 Index (purple line) has meandered sideways over the past month, key ag stocks like Mosaic (NYSE: MOS), Potash (NYSE: POT), and Agrium (NYSE: AGU) have all risen double-digit percentages.

Yet another ag-related company with a price chart that’s growing like Topsy is Monsanto (NYSE: MON). A brief survey of the chart reveals a bumper crop of bullish developments.

1. During Monday’s trading session, MON was able to break above a key six-month resistance level, hinting at more upside to come.

2. The consolidation of the past six months has come in the form of a head and shoulders pattern signaling a subtle shift in control from the bears to the bulls.

3. The recent uptrend that has taken hold since June has been accompanied by a number of high-volume accumulation days.

Monsanto's seed focus helps keep those margins high, as it can offer patented varieties while simultaneously developing the next big thing. Monsanto's drought-resistant corn products are also sure to be in even higher demand now. This year's dry weather has created the worst drought in the United States since the '50s, affecting huge swaths of farmland across the country.

Monsanto isn't cheap compared to most of its peers, but it's got two things going for it: earnings stability and a strong net margin. The company's free cash flow is also a lot closer to its net income than most of its peers.

The Play

Therefore, to exploit a continued rise in Monsanto’s price trend, the following is recommended:-

**OPTION TRADE: Buy the MON Jan 2013 87.500 call (MON130119C00087500) at or under $5.80, good for the day. Place a protective stop limit at $2.50 and a pre-determined sell at $10.00.

”Success is simple. Do what's right, the right way, at the right time.”

Option Tip for your Success!
Options traders are not successful because they win.
Options traders win because they are successful.

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