Takeover Battle Spurs Options Activity.

CHICAGO (TheStreet) -- Although Terra Industries(TRA Quote) did not announce notable news Tuesday, the continued takeover battle with CF industries(CF Quote) is keeping investors on their toes.

At least one option investor expressed a bullish bet in the agriculture company just one week prior to November options expiration.

The out-of-the-money November 40 calls have traded more than 7,200 times today versus current open interest of 2,300 contracts, suggesting that these calls were traded to open. The majority of these traded at or near the ask price at 40 cents per contract, likely meaning they were initiated on the buy side.

This means bullish investors who bought these calls need TRA shares to expire higher than $40.40 to make money, unless of course the calls gain value prior to expiration following a rise in the shares and the investor chooses to sell these contracts to book profits.

The November 40 calls have a delta of approximately 17, meaning for every dollar move in the underlying, these options should change by 17 cents -- moving lower as the stock drops and higher as the stock rallies.

Given that TRA closed down 26 cents to $35.82, these calls should be down roughly four cents, but the call-buying activity has actually pushed the call price UP on the day. The options are currently trading five cents higher and implied volatility has expanded to around 67%.

TRA is the target of a hostile bid by CF Industries. Just last week, CF increased its terms for TRA to $32 in cash and 0.1034 shares of CF. That would value TRA at roughly $40. TRA is slated to have a shareholder meeting on Nov. 20. A prime motivation to buy these calls might be the belief that TRA could finally receive terms from CF that are higher than $40. -- Written by Jud Pyle in Chicago