Options Trading News

November 20, 2012  Tue 4:32 AM CT

Mosaic bounced yesterday, and traders looked for the gains to continue.

optionMONSTER's Heat Seeker monitoring system detected the purchase of 1,800 March 52.50 calls for $2.53 and the sale of an equal number of March 60 calls for $0.50. Volume exceeded open interest at both strikes, indicating that new positions were initiated.

The trade cost $2.03 and will earn a maximum profit of 269 percent if the fertilizer stock rallies back to $60 or higher by expiration. That's roughly the same price where it peaked in September, so the investor is apparently looking for a retest of that level. (See our Education section for more on the strategy, known as a bullish call spread because it leverages a move between two prices.)

MOS rose 3.39 percent to $51.20 yesterday but is down 15 percent in the last two months. The company was trading at its lowest price since mid-June before yesterday's rebound, having fallen along with most other materials stocks on concerns about a slowing economy.

Total option volume in MOS was 3 times greater than average in the session, according to the Heat Seeker.
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As I stated in last week's article, a break out or a break down needs to have a couple things happen before it is considered a confirmed break out or break down. The only problem is that in today's market where things move much more quicker than they did just a few years ago, two days could wind up being the majority of the expected movement, if not the whole movement.

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