By Jud Pyle, CFA, chief investment strategist for the Options News Network
Heavy put-buying activity in
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
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.
More than 13,600 Sept. 35 puts have traded by the afternoon. Put-buying in MOS does not mean investors should sell their shares. But regardless of the call selling and buying that went on when my previous article on MOS went to press, we see now that investors who hedged their bullish bets on the company might now be sitting prettier than those who did not.
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Jud Pyle is the chief investment strategist for Options News Network (www.ONN.tv) 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."