Sponsored By:

Intrepid Potash (IPI)

Dear Fellow Options Trader,

Intrepid Potash (IPI) is a potash mining company with operations in New Mexico and Utah.

Potash is a critical ingredient for fertilizer. In a world of crazy change, one constant is that people will keep eating and farms will keep growing crops. The company also has a price advantage, as its transportation costs are below the industry average.

In 2009, the company plans to increase production capacity by about 15%. Sell-side analysts expect the company's earnings to be about $5 next year. The stock is currently trading at about $21.50, or about four times earnings per share.

The potash mining business has huge barriers to entry. To open a mine costs about $2.5 billion and takes 5-7 years. In a world where credit is tightening, this company should be free of new competition for the foreseeable future. Additionally, current inventories of potash are extremely low in the 1-3 week range.

For a bullish play on this company, we recommend selling the IPI Nov 20 Puts (IPIWU) for $1.50 or better.

We're recommending that you sell the puts, rather than buying calls, because we do not mind owning this stock at $18.50 per share if it suffers from further declines. Our bet is that the strong company fundamentals, low valuation and slowdown in forced selling by hedge funds will help this stock to stabilize and eventually appreciate.

Remember, when selling puts, only sell an amount that you are comfortable owning if the stock is put to you.

Have a great day trading.

Nick Atkeson and Andrew Houghton