TRADE ROLL

CF Industries (CF):  101.60

No let up in the fertilizer shortage and skyrocketing prices from the recent economic and world events. Some experts are even predicting another 18 months to 2 years of over-demand for fertilizer prices.

That has been good for our position in CF Industries were the stock price doubled in the last 9 months. We have a 20 May 92 put that will expire worthless tomorrow. Let’s roll the position out today but stay relatively cautious by not moving it up too much.

ACTION:  Roll the CF 20 May 92 put to the CF 27 May 93 put for a net credit of around 1.00 to 1.10 and a 1.1% return

Buy to close the CF 20 May 92 put

Sell to open the XF 27 May 92 put 

TRADE ROLL

Philip Morris (PM):  100.50

Since we last reviewed Philip Morris, they made a big splash agreeing to purchase Swedish tobacco giant Swedish Match AB (OTCPK:SWMAY) for over $16 billion of cash. This acquisition is expected to accelerate the company’s plan to transition to a smokeless future. 

However, the deal may come with some short-term head wins for the stock in terms of the combination of cash and debt to make the acquisition. Rising interest rates could put a dent into PM’s cash flow and Wall Street has noticed.  The stock traded down immediately after the announcement and stumbled again today in a down market – a time when PM stock usually holds or shines.

Our 20 May 100 put expires tomorrow and is close to at the money. Let’s roll the position out and down to collect cash but give us some room to maneuver when the stock price bounces around.

ACTION:  Roll the PM 20 May 100 put to the PM 3 Jun 98 put for a net credit of around 0.80 to 0.90

Buy to close the PM 20 May 100 put

Sell to open the PM 3 Jun 98 put