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Thursday, January 13, 2011

Farmville profits with Monsanto

Buy/write on Monsanto:

This one has had quite a run, but I still believe this will be a profitable trade.

Buy 100 monsanto (7,478)
Sell 1 Jan 12 72.5 Put 980
Sell 1 Jan 12 75 Call 995
Total outlay 5,503

Profit if called in Jan 2012: 1,980/5,503 = 36% plus any dividends collected will increase your percentage.

If monsanto is below 72.5 on Jan 12, you can either roll your short put out to a later date or buy 100 more shares at a net cost of 62.7. This trade is still profitable down to the 60ish price.