Options: Bullish Put Sale in Mosaic

After the close tonight, Mosaic(MOS Quote) announced its second- quarter results: EPS of $2.15. The initial share reaction was a selloff of less than a dollar to $36.90 from a closing level of $37.67. But at least one option trader was bullish today by selling puts in February.

Today, more than 6,000 of the February 35 puts traded vs. an open interest of just 516. Most of the larger volume in these puts today was on the sell side, and the puts closed around $3.30. The break-evens on these puts for the sellers is $31.70, meaning that the seller will start to lose money if the stock is below $31.70 at expiration.

Watching put activity like this in MOS is a microcosm of the way investors are taking advantage of historically high implied volatility levels right now. With a closing price of $3.30 on these February 35 puts and a stock price of $37.67, that implies a volatility level of 86. Compared to the 63-day historical volatility of 140, that might seem low, but relative to the 60 level of historical volatility in the stock last spring, it is clearly still high. Add to that the fact that the stock has typically held the $30 level for the last three months, and this put-seller is taking advantage of both good break-evens and a potential decline in implied volatility. ...