By Jud Pyle, CFA, chief investment strategist for the Options News Network
A potential surge in fertilizer sales has sparked bullishness in at least one
During the first hour of trading Wednesday, one customer sold (to close) 4,500 MOS June 55 calls for $6.50 (with less than a month to go before expiration) and bought (to open) 9,000 Sept. 75 calls for $2.75. Current open interest on the June 55 calls is 18,500, while current open interest on the Sept. 75 calls is at a paltry 800. The investor collected $1 on this transaction, which will stay bullish in nature assuming he does not hedge by buying puts against the Sept. 75 calls.
The call activity we see today is the opposite of what
when a customer bought more than 3,000 far-out-of-the-money Sept. 30 puts with the stock trading at $45. MOS shares hovered around $42 from February to the beginning of this month, but they have jumped about $11 since May 11.
MOS shares are currently trading up $1.32 at $58.17, making the June 55 calls in the money and the September 75 calls about 29% out of the money (but with more than three months until expiration). This stock is up more than 160% since hitting $22.31, a 52-week low, on Nov. 20. The fertilizer provider did not announce any significant news to instigate the rally so far today, but reports that analysts are bullish on MOS due to rising commodity prices and higher production expectations could continue to push shares higher.
Bullish call activity such as this does not mean investors should run out and buy MOS shares. It is noteworthy that at least one customer is rolling up their long strike in return for more contracts on a bet that and MOS stock will close higher than $77.75 (the long call strike plus the premium received) by September expiration.
Jud Pyle is the chief investment strategist for Options News Network and the portfolio manager of TheStreet.com Options Alerts. Click here for a free trial for Options Alerts. Mr. Pyle writes regularly about options investing for TheStreet.com.
Jud Pyle, CFA, is the chief investment strategist for Options News Network. Pyle started his career in finance in 1994 as a derivative analyst with SBC Warburg. After four years with Warburg, Pyle joined PEAK6 Investments, L.P., in 1998 as an equity options trader and as chief risk officer. A native of Minneapolis, Pyle received his bachelor's degree in economics and history from Colgate University in 1994. As a trader, Pyle traded on average over 5,000 contracts per day, and over 1.2 million contracts per year. He also built the stock group for all PEAK6 Investments, L.P. hedging, which currently trades on average over 5 million shares per day, and over 1 billion shares per year. Further, from 2004-06, he managed the trading and risk management for PEAK6 Investments L.P.'s lead market-maker operation on the former PCX exchange, which traded more than 10,000 contracts per day. Pyle is the "Mad About Options" resident expert. He is also a regular contributor to "Options Physics."