Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Potash Corp./Saskatchewan (USA) (POT): Ag Stock’s Rebound Could be Your Ticket to 122% Profits

At this time last year, the U.S. was in the midst of the most severe and extensive drought to hit the country in the past 25 years. The inclement conditions had a serious impact on the agricultural sector, reducing crop yields and driving up prices.

This year, lack of rain is not an issue. In fact, heavy rains and flooding have delayed planting, damaged crops already in the ground and prevented farmers from sowing all their seeds.

One company that benefits directly from farmers’ need to combat Mother Nature’s whims and increase crop yields is Potash Corp./Saskatchewan (USA) (NYSE:POT).

After hitting a low below $30 in 2010, shares of the world’s largest fertilizer company staged a key breakout from the $37 level in August of that year. They went on to more than double from those lows, hitting highs near $63 in 2011.

Potash Corp./Saskatchewan (USA) (NYSE:POT)

Since late summer 2011, Potash Corp./Saskatchewan (USA) (NYSE:POT) has traded in a range between $37 and $50. It is currently sitting just above key support at the bottom of that channel. A move to the top of that range at $50 is the first target, and a break of that resistance level targets a run to the 2011 highs near $63.

The initial $50 target is about 32% higher than current prices, but traders who use a capital-preserving, stock substitution strategy could more than double their money on a move to that level.

One major advantage of using long call options rather than buying a stock outright is putting up much less capital to control 100 shares — that’s the power of leverage. But with all of the potential strike and expiration combinations, choosing an option can be a daunting task.

Simply put, you want to buy a high-probability option that has enough time to be right, so there are two rules traders should follow:

Rule One: Choose an option with a delta of 70 or above.

An option’s strike price is the level at which the options buyer has the right to purchase the underlying stock or ETF without any obligation to do so. (In reality, you rarely convert the option into shares, but rather simply sell back the option you bought to exit the trade for a gain or loss.)

It is important to buy options that pay off from a modest price move in the underlying stock or ETF rather than those that only make money on the infrequent price explosion. In-the-money options are more expensive, but they’re worth it, as your chances of success are mathematically superior to buying cheap, out-of-the-money options that rarely pay off.

DOWNLOAD FREE REPORT: Warren Buffett's Best Stock Picks

Let Warren Buffett, George Soros, Steve Cohen, and Daniel Loeb WORK FOR YOU.

If you want to beat the low cost index funds by 19 percentage points per year, look no further than our monthly newsletter.In this free report you can find an in-depth analysis of the performance of Warren Buffett's entire historical stock picks. We uncovered Warren Buffett's Best Stock Picks and a way to for Buffett to improve his returns by more than 4 percentage points per year.

Bonus Biotech Stock Pick: You can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12 months.
Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.