Option Investor

Option Writer Portfolio - August

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Monsanto Company (MON) provides agricultural products for farmers principally in the United States. It operates in two segments, Seeds and Genomics, and Agricultural Productivity. The agricultural and fertilyzer sector has been quite volatile. The trade on MON is to sell 1 contract of the 100 strike for August.

One would think that 13 points is a lot of room for error but MON has dropped signifantly from its recent high of $145.80 on 6/18. MON is trying to hold onto the 200 day SMA (red line) as well as the 112 recent low established on 7/8. There is a gap down at $99 that may end up getting filled. However, a drop below $108.11 would be a strong alert to close out the position due to a complete breakdown. The stock has dropped $32 points in a month and can break down to the March lows quickly. We will be defensive if MON breaks below $108 even though the stock is well above the strike and cost basis risk management levels.

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