Benzinga | Oct 25, 2020 08:57AM EDT

Mike Khouw's Archer-Daniels-Midland Options Trade

On CNBC's "Options Action," Mike Khouw suggested a bullish options trade in Archer-Daniels-Midland Co (NYSE:ADM). He likes the stock because it is trading at less than 13 times earnings, it has a very strong balance sheet, fairly stable business and problems with ethanol are already priced in.

To make a bullish bet, Khouw wants to buy the January $50/$57.50 call spread for a total cost of $2.95. The trade breaks even at $52.95 or around 2% above the closing price on Friday. The long call is already in the money so Khouw is paying only $1.80 in extrinsic premium. The maximal profit for the trade is $4.55.