Options: Mosaic Put-Buying Rises

By Jud Pyle, CFA, chief investment strategist for the Options News Network

Heavy put-buying activity in Mosaic(MOS Quote) converted some bulls to bears in the agriculture nutrients producer today.

One investor looking for downside protection amid MOS' slow and steady rally since the end of last year bought 10,000 Sept. 35 puts at $1.42 per contract. MOS shares are currently trading down $3.89 to $52.08 -- about 7% below yesterday's close. The Sept. 35 puts, currently home to open interest of 3,700, are currently up 45 cents.

MOS shares are up more than 100% since reaching a 52-week low on Nov. 20, when the stock dipped to $22.31. But in general, commodity stocks are taking it on the chin as the dollar rallies after a prolonged slide. Investors buying puts are bearish and betting that MOS stock will close below $33.58 (the strike price minus the premium the investor paid) come September expiration.

These shares are a long way from the 52-week high of $161.08 they hit a year ago, and the break-even price shows how much further investors are betting the stock will move away from its highest point.

A few weeks ago, ONN's Sidewinder report indicated a potentially bullish call spread on MOS following a better-than-expected World Agriculture Supply and Demand Estimates report released on May 11. I wrote an article on May 13 about a customer who sold more than 10,100 Sept. 65 calls for around $2. With the stock up to $47.92 the morning after, he could have bought 5,000 Sept. 55 calls for $3.80 when the stock was down at $46. Investors could have been willing to be long agriculture stocks because of positive planting expectations and a 55% increase in soybean imports from China so far this year.