Unusual Option Activity: Archer Daniels Midland (ADM)

Agricultural producer Archer Daniels Midland (ADM) is out of favor with the market. Shares are down 16 percent over the past year, and one trader sees more downside in the months ahead.

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  • That’s based on the March $65 puts. With 65 days until expiration, 6,037 contracts traded compared to a prior open interest of 158, for a 38-fold rise in volume on the trade. The buyer of the puts paid $1.10 to make the bearish bet.

    ADM shares recently traded just under $71, so shares would need to drop $6, or about 8.5 percent, for the option to move in-the-money.

    The strike price of the option is under the stock’s 52-week low of $69.31. Shares have managed to bounce when hitting $70 in the past few months.

    Operationally, shares have struggled. Both earnings and revenues have dropped by double-digits in the last year. On the plus side, ADM is now valued at 10 times earnings.

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  • Action to take: The trend is pushing lower for shares, and if $70 doesn’t hold, they’ll likely move lower. Interested investors should wait for the downtrend to wait before buying shares.

    For traders, the March $65 puts play well to the current downtrend in shares. Traders should look to take quick profits on a large declining day for ADM shares.


    Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any companies mentioned in this article.

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