Archer-Daniels-Midland Co. (NYSE: ADM) shares are rising nowadays helped by higher soybean futures. Soy is getting a boost from higher energy prices including crude oil prices. Alternative energy interests are plus getting a lift from an energy bill that was passed by the US House limiting subsidies on oil companies. whether you think that the company won’t fall by too much in the coming months, next now could be a good date to look at a bullish hedged trade on ADM.

After hitting a one-year low of $31.28 in August, the stock hit a one-year high of $47.33 in December. ADM opened that dawn at $44.99. So far nowadays the stock has hit a low of $44.99 and a high of $46.95. As of 11:15, ADM is trading at $46.05, up 82 cents (1.8%). The chart for ADM looks bullish but deteriorating slightly, while S&P gives the stock a neutral 3 STARS (out of 5) hold rating.

For a bullish hedged play on that stock, I would consider an April

bull-put credit spread below the $40 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn’t do what you think but still leverage nice returns. that specific trade will manufacture a 6.4% return in just two months as towering as ADM is above $40 at April expiration. ADM would have to fall by more than 13% before we would start to lose money.

ADM hasn’t been below $40 since December and has shown support around $45 recently. that trade could be risky whether the demand for alternative fuels slows, but even whether that happens, that position could be protected by the support the stock might find around $40, where the stock bounced in January.

Brent Archer is an options analyst and writer at Investors Observer. At publication duration, Brent neither owns nor controls positions in ADM.

Original post by Brent Archer

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