By Jud Pyle, CFA, chief investment strategist for the Options News Network
Investors selling calls on
The Mosaic Company
could still be bullish in the hope that shares of the agriculture nutrient producer will continue their week-long ascent.
This morning a customer sold more than 10,100 Sept. 65 calls for around $2.00 vs. current open interest of 1,148. MOS shares are up 20 cents to about $47.92 while the value of these calls has declined five cents so far today. But the 11% rise in MOS shares so far this week could potentially tell an overarching bullish tale for the equity.
MOS, along with other agriculture stocks such as
, rallied through yesterday's release of the World Agriculture Supply and Demand Estimates report. The WASDE report said U.S. commodities production will slightly decrease while consumption will increase in May compared to last month, resulting in a reduction in world stocks.
Corn supply, specifically, will decrease slightly while demand could increase by 3.5%, which computes to an 8% drop in world corn stocks compared to May last year.
It's worth noting today that first-quarter earnings reports have already passed for MON, MOS and POT, so investors are more willing to be long these stocks because of the positive planting expectations from the WASDE report.
In addition, China trade data show a 55% increase in soybean imports since last year, according to the USDA. Such demand gains helped push MOS stock up, but analysts anticipate a major decline in China's import demand as commodity futures prices increase.
Call-selling such as this does not mean people should run out and sell their shares. In fact, Tuesday a customer bought 5,000 Sept. 55 calls for $3.80 with stock at $46.00.
Such activity could indicate that an investor bought the Sept. 55 calls to let the stock run and sold the Sept. 65 calls Wednesday as a way of legging into a bullish call spread. This call-selling could also demonstrate that at least one investor is long MOS shares but hedging his or her profit by selling calls. This creates a covered call position in light of the stock's recent sprint higher.
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."