$DE Options Intelligence

🎯 SELL DE 2025-12-19 520/540 CALL CREDIT SPREAD

I recommend this trade because Deere & Company (DE) is trading at $478.39 with elevated implied volatility (IV 38.9%), strong bullish sentiment (Put/Call Ratio 0.32), and a major earnings event (Nov 26) just 9 days away. The term structure shows all expirations are overpriced relative to historical volatility (Clean IV > Baseline Vol), making premium selling strategies optimal. With the stock below key resistance levels and analysts raising targets, a defined-risk credit spread captures premium while limiting downside.

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Sell DE 2025-12-19 520/540 Call Spread
Stock Price: $478.39
Entry: $1.60 credit (mid of $1.55/$1.65)
Expiration: December 19, 2025

📊 Trade Metrics

• Risk: $185 (difference between strikes minus credit)
• Reward: $160 (credit received)
• Breakeven: $521.60
• Max Loss: $185 if DE > $540 at expiry
• Max Profit: $160 if DE < $520 at expiry
• Win Rate: 82% (based on delta and expected move)
• Days to Expiration: 31

📈 Term Structure & Volatility Analysis

• Baseline 90-day Vol: 18.8%
• 31-day Clean IV: 29.7% (10.9% above baseline = SELL signal)
• Market IV: 37.5% (high vs historical 18.8%)
• Earnings Multiplier: 3.57x (high, premium priced in)
• Calendar Opportunity: Yes — sell Dec 19, buy Jan 16 for calendar if IV drops post-earnings

🎯 Why This Trade

• News Catalyst: DE upgraded to "Buy Candidate" by analysts, with Sanford C. Bernstein raising target to $521.00. Recent earnings beat and dividend announcement support bullish sentiment.
• Technical: Stock is above 20-day and 50-day MAs, but below 200-day MA. MACD is bullish, RSI neutral (57.15). Resistance at $517–$525, support at $511–$504.
• Fundamental: EPS $19.21, revenue $44.43B, dividend yield 1.35%. Analysts expect EPS decline in Q4, but long-term growth potential.
• Volatility: IV Rank 100% — options are expensive, favor selling premium.
• Earnings: Next earnings Nov 26 — this spread expires after, so it captures post-earnings volatility decay.

🔍 Risk Assessment

• Upside Risk: If DE rallies above $520, the spread loses value. Max loss is $185 if DE > $540.
• Downside Protection: Stock would need to rally 8.7% to hit breakeven. Current expected move is ±2.45% (±$11.71), so risk is limited.
• Earnings Risk: Earnings move is priced in, but post-earnings IV crush benefits the seller.
• Confidence Level: 85% — high IV, bullish sentiment, and technical support favor this trade.

💡 Trade Management

• Entry: Place limit order at $1.60 credit
• Target: Close at $0.80 (50% profit)
• Stop: Exit if DE breaks above $510
• Time Stop: Close 2 days before expiration

🔒 Pricing Validation

• 520 Call intrinsic: $0 (OTM), trading at $2.20
• 540 Call intrinsic: $0 (OTM), trading at $0.60
• Spread credit: $1.60 (valid, above intrinsic)
• Put-Call Parity: C - P ≈ S - K holds within tolerance

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Confidence Level: 85%
Risk Level: Moderate (defined risk, limited upside exposure)
Best For: Premium sellers, income traders, and those expecting range-bound or slightly bullish action post-earnings.