Have you ever watched a stock climb to dizzying heights, only to sense it’s about to take a breather? That’s where Deere & Co (DE) sits right now—a titan in agricultural equipment that’s been riding a bullish wave but showing signs of fatigue. With commodity prices cooling and macroeconomic clouds gathering, I’ve been digging into how to play this moment with options. The opportunity to trade a potential pullback feels ripe, and I’m excited to break down a strategy that’s both calculated and accessible.
Why Deere’s Rally Might Be Losing Steam
The agricultural sector is no stranger to cycles, and Deere & Co has been a standout performer. Its stock recently hit an all-time high, but cracks are starting to show. From oversupply in commodities to weakening demand for heavy machinery, the fundamentals are shifting. Let’s explore why this could be the perfect time to position for a reversal using options trading.
The Bearish Case: Fundamentals Under Pressure
Deere’s stock has been priced like a premium player, and for good reason—its growth metrics outshine the industry. But here’s the catch: the company’s recent earnings paint a less rosy picture. A 16% year-over-year sales drop across all business units and a 22% decline in earnings per share scream caution. When every segment is bleeding double digits, it’s hard to ignore the macroeconomic headwinds battering agriculture.
Agricultural equipment demand often mirrors commodity cycles—when crops flood the market, machinery sales stall.
– Financial market analyst
Deere’s valuation doesn’t help its case either. Trading at a forward P/E of 28.1x compared to the industry’s 17.8x, it’s priced for perfection. But with six straight quarters of declining revenue and earnings, that premium feels shaky. Perhaps the most concerning part? The market hasn’t fully priced in these risks yet, leaving room for a correction.
Technical Signals: A Reversal on the Horizon?
Beyond the numbers, the charts are whispering warnings. Deere’s stock recently touched $532.47, a fresh peak, but the Relative Strength Index (RSI) on the weekly chart tells a different story. While the stock made a higher high, the RSI formed a lower high—a classic bearish divergence. This mismatch suggests momentum is fizzling, and a pullback could be imminent.
- Higher high in price: Deere’s stock surged to $532.47, a record.
- Lower high in RSI: The indicator failed to confirm the price peak.
- Implication: Weakening momentum often precedes a reversal.
I’ve seen this setup before—technical signals like these often act as early warnings. Combine that with the broader agricultural downturn, and it’s hard not to feel bearish. But how do you trade this without betting the farm?
Crafting a Bearish Options Strategy
Options are my go-to for trades like this. They let you define your risk while positioning for a move—perfect for a stock like Deere that’s teetering on the edge. My strategy of choice? A put vertical spread. It’s cost-effective, limits your downside, and capitalizes on a potential drop. Here’s how to set it up.
The Trade Setup: Jun 20, 2025 Put Vertical
Let’s get specific. I’m eyeing a Jun 20, 2025 $530/$520 put vertical with a debit of $4.48. This involves:
- Buying the $530 put: Priced at $15.73, this gives you the right to sell Deere stock at $530.
- Selling the $520 put: Priced at $11.25, this offsets the cost and caps your profit potential.
| Metric | Value |
| Maximum Reward | $552 (if DE is above $530 at expiration) |
| Maximum Risk | $448 (if DE is below $520 at expiration) |
| Breakeven Point | $525.52 |
This trade is a calculated bet. If Deere’s stock slides below $525.52 by expiration, you’re in the money. If it stays above $530, you lose the $448 debit—no more, no less. It’s a low-risk way to play a high-probability setup.
Why This Trade Makes Sense
I love this strategy because it balances risk and reward. The agricultural sector’s woes—think oversupply and softening demand—make Deere vulnerable. Add the bearish RSI divergence, and the setup feels like a no-brainer. But what really seals the deal is the defined risk. You know exactly what you’re risking upfront, unlike shorting the stock or other high-stakes moves.
Options allow traders to navigate uncertainty with precision, turning market signals into profitable opportunities.
– Options trading strategist
Another reason to like this trade? Timing. With the stock at its peak and macro pressures mounting, the window for a pullback feels wide open. In my experience, these moments—where fundamentals and technicals align—are where smart traders thrive.
Navigating the Risks
No trade is foolproof, and this one’s no exception. Deere could defy the odds and keep climbing—maybe a surprise earnings beat or a commodity price spike shifts the narrative. If that happens, your loss is capped at $448, but it still stings. There’s also time decay to consider. Since this trade expires in June 2025, you’ve got time, but the clock’s still ticking.
- Upside risk: Deere’s stock could rally further, invalidating the bearish thesis.
- Time decay: The longer the stock stays flat, the less valuable your options become.
- Market surprises: Unexpected news, like a trade deal or weather event, could boost agricultural demand.
To mitigate these risks, I’d keep a close eye on commodity prices and Deere’s next earnings report. If the stock starts showing bullish momentum, you might consider closing the trade early to limit losses. Flexibility is key in options trading.
Broader Market Context: Why Agriculture Matters
Deere’s story isn’t just about one company—it’s a window into the agricultural sector’s health. When commodity prices tank, farmers tighten their belts, and equipment sales suffer. Right now, oversupply in crops like corn and soybeans is dragging prices down, and that’s bad news for Deere. But it’s also a reminder: markets are interconnected.
Agricultural Market Snapshot: Corn Prices: Down 12% YoY Soybean Prices: Down 15% YoY Impact on Deere: Reduced demand for tractors and harvesters
This trade isn’t just about Deere—it’s about reading the market’s pulse. If you can spot these macro trends early, you’re ahead of the game. That’s why I’m always scanning for signals, whether it’s a technical divergence or a shift in commodity prices.
Tips for Smarter Options Trading
Trading options can feel like navigating a maze, but a few principles keep you grounded. First, always define your risk—trades like the put vertical shine because you know your max loss upfront. Second, don’t ignore the charts. Technical signals like RSI divergence can be your edge. Finally, stay disciplined. Emotions can wreck even the best setups.
- Know your risk: Use strategies that cap your downside.
- Trust the signals: Technicals like RSI can guide your timing.
- Stay calm: Stick to your plan, even when the market gets wild.
I’ve learned this the hard way—chasing a hot stock without a plan is a recipe for regret. With Deere, the setup feels right, but discipline will make or break the trade.
What’s Next for Deere?
Predicting the future is tricky, but the signs point to a bumpy road for Deere. If commodity prices keep sliding, demand for equipment will stay soft. That said, Deere’s a strong company with a loyal customer base, so a full-blown collapse seems unlikely. The play here is a tactical pullback, not a doomsday bet.
Markets reward those who read the signs early and act with precision.
– Veteran trader
If you’re considering this trade, ask yourself: are you ready to act on the signals? The put vertical is just one tool—there are others, like outright puts or bear call spreads, depending on your risk appetite. Whatever you choose, make sure it aligns with your goals and market outlook.
Final Thoughts: Seizing the Opportunity
Deere’s at a crossroads, and that’s where traders like us can shine. The combination of overvaluation, declining fundamentals, and technical warnings makes this a compelling setup. By using a put vertical spread, you can position for a pullback with controlled risk. It’s not about betting against Deere—it’s about reading the market and acting decisively.
In my experience, the best trades come when you align the stars—fundamentals, technicals, and market context all pointing the same way. Right now, Deere’s flashing those signals. Will you take the leap? The market’s always moving, and opportunities like this don’t wait.
