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John Deere In The Headlights

25-09-24

US domestic manufacturing is becoming a core election issue, with key states such as Pennsylvania, Michigan and Georgia in focus this week.

Taking aim at US manufacturers which have sought to outsource their labour recently, John Deere met the Trump campaign’s crosshairs with threats of a 200% tariff on the agricultural manufacturer should it opt to move it’s production across the border to Mexico, shortly after Tuesday’s closing bell.

Shares in Deere & Company dipped 1.6% in after-hours trading yesterday. Vice President and Democratic Candidate Kamala Harris is set to give her stance on US manufacturing in Pennsylvania later today, cementing the theme of US protectionism going into the November election.  

If you believe US manufacturing may suffer in the short term from protectionist tariffs imposed by either presidential candidate, then you may consider buying a put option. 

Put Option

buy +1 DE 15-Nov-2024 $410 Put @ $12.50  

Trade Idea

Put Option

John Deere & Company (DE) Cash Price = $410 (as of 25/09/2024 at time of writing) 

Total consideration: $1250 (excl. fees and commissions) 

1 (contract) x $12.50 (contract price) x 100 shares (contract size) = $1250 debit 

A 10% decrease in the current share price to $369 by 15-Nov-2024 expiry would value the put option at $41 for a total consideration of $4100; yielding a 228% return on your initial investment. 

The $410 put option would break even if the DE share price decreased to $397.50 by expiry on 15-Nov-2024 

Maximum loss: $1250 (excl. fees and commissions) 

Defined risk profile, maximum loss of a long option position is equal to the premium paid. 

Written By

Sebastian Blanco

Desk Broker

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