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November 20, 2012  Tue 4:32 AM CT

MOS: SEE CHART GET CHAIN FIND STRATEGIES
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 discussed last week, when using the Stock Replacement Strategy to replace a stock position to trade direction, we want to use an option that has very similar characteristics to the stock. We talked about using the deep in-the-money, 80 to 85 delta option that is similar in the Greeks and has relatively little extrinsic value which tends to work against us in stock directional trading.

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