We purchased an at the money straddle for a small debit of only 3.22. This trade is notably cheap because the IVR is extremely low: 2%. Being a long straddle (buying the calls and puts at 165), we are giving ourself unlimited profit, risking a limited $322 per contract.
We take our neutral position because of the positive characteristics of the trade itself, but the fundamental conditions further our thought. With an equity value of over 51 billion, John Deere is a company with significantly large exposure to China, and Chinese trade tensions. Also, interest rates have a somewhat direct effect on the profitability of this corporation. Financial Services comprises 9.2% of Deere's market cap, so as cuts in July become more of a reality, the profitability of the Financial Services division will be affected, possibly drastically. Lower rates mean lower borrowing costs for Deere, and could cause the stock to move outside of the breakevens to lead to profits.
Also, the technicals indicate the high possibility of large movements prior to maturity. The RSI, MFI and Stochastics all indicate an overbought sentiment, and the DMI DI+ and DI- indicate change in direction. The PSaR also has recently switched direction.