Options Trading News

August 1, 2013  Thu 4:14 AM CT

Potash gave up ground again yesterday, and a large trade is positioning for further losses.

optionMONSTER systems show that a trader sold 10,000 January 25 puts for the bid price $1.13 and, seconds later, bought 5,000 January 28 puts for $2.32. Volume was above open interest in the 25s but below it in the 28s.

The trader could be rolling a short-put position to a lower strike and doubling the size, but it is far more likely that this is a new ratio spread that would generate a maximum profit with POT down around $25 at expiration. That spread cost the trader just $0.06, which is the amount at risk if shares are above $28, so this is a low-cost way of taking a downside position. (See our Education section)

POT fell 8.31 percent to $29 even, continuing to fall with other fertilizer names for the second day in a row. The stock was last down at $25 in March 2009.

More than 179,000 POT options traded yesterday, compared to a daily average of 31,390.
Share this article with your friends


Premium Services

Archived Webinar

Education & Strategy

Options Academy: More on the Covered Call Strategy

Last week, we talked about the Covered Call and the misconceptions that surround it. We spoke about how an investor must realize that the Covered Call is actually a premium collection strategy and not so much a directional one. If an investor can grasp this idea, the investor stands to do a heck of a lot better in the strategy than they currently do.

View more education articles »