Deere & Company (DE) Option Traders Take a Cue from Buffett

Deere & Company (DE) traders are showing a rare appetite for call options

Feb 18, 2015 at 11:04 AM
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Deere & Company (NYSE:DE) option traders are taking a cue from Warren Buffett today. Early call volume is running at five times the average rate, and seven of the 10 most active options are calls. In other words, it looks like option buyers are betting bullishly on the farming equipment titan.

Digging deeper, it appears traders are buying to open the March 92.50 and 95 calls. By purchasing the options, the speculators expect DE to extend today's rally and surmount the strikes by the close on Friday, March 20, when the options expire. In fact, a move atop $95 would place DE in territory not charted in two years. At last check, the security was 2.1% higher at $91.76.

Today's appetite for bullish bets marks an about-face for DE option buyers. On the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the equity's 10-day put/call volume ratio of 5.72 stands higher than 95% of all other readings from the past year. In simpler terms, DE traders have bought to open puts over calls at a near annual-high clip during the past two weeks.

In the same skeptical vein, short interest accounts for 10% of DE's total available float. It would take more than two weeks to unwind these positions, at the stock's average pace of trading.

As alluded to earlier, Deere & Company (NYSE:DE) is muscling higher on the heels of an Oracle of Omaha endorsement. Specifically, Warren Buffett's Berkshire Hathaway Inc. (NYSE:BRK.A) increased its stake in DE in the fourth quarter -- and hit the bricks on this blue chip. Should DE extend today's advance, or should the company unveil solid earnings on Friday, an unwinding of pessimism in the options pits or a short-squeeze situation could add fuel to the stock's fire.


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