Easing back into MON with a Naked Put

After my long (for me long is over 3-4 months) run with Monsanto (NYSE: MON) ended over 30 days ago I decided to give it another look.  MON is up a few bucks from where it was when I got out, but I was able to take a loss on the underlying shares while finishing the series of trades with a profit from the premiums I took in along the way.  Now that I’ve waited over 30 days I don’t have to worry about the wash rule and can take those losses off of my taxes.

While trading at $86.30 my limit order hit and I sold one MON June 85 naked put (MONRQ) and received $289.25 after commissions.  MON is down a little today which helped the premium edge up to hit my limit.  I could see MON stabilizing here or even dropping to around $83.00 before moving back up again.  With the premiums being as strong as they are with MON, I’ll be patient and if assigned will start writing covered calls again.  Since I sold the naked put out-of-the-money I almost have a 5% cushion before I hit break even on the trade.  MON can move 5% or more in a day, so there’s a decent risk.  I didn’t hedge though, because I’m willing to take the risk of assignment and own the shares. 

MON has a trailing P/E of 21.03 and a forward P/E of 16.45 which shows me it’s not too expensive compared to its own historical ratios.  If assigned, it can be a longer term hold again without causing too much worry.