Ahead of earnings on Deere

Deere & Company (DE) reports earnings tomorrow and the stock has been trading in a rang from $75-85 over the past 3 months, currently at $82.25. The consensus for earnings is $1.48/share down from $2.03 during the same quarter last year, and the median target from analysts covering the company is at $72/share. If DE misses earnings or guides on softer revenue in future quarters, the stock should drop a few dollars on that news. To say that DE is facing headwinds from global demand may be a bit of an understatement, consider that annual revenue has fallen 20% in the year ended 2015, and we know that the global economy hasn't accelerated much this year. A stronger dollar should also hurt sales for DE as their products are more expensive for overseas customers.

We are buying the July $80 Puts on DE for $2.62. Any drop in the stock tomorrow will likely be an immediate profit on this trade, however if they beat earnings and the stock moves higher, we will have a few more weeks to decide if we want to get out or wait for a pull back.