CF bulls want to harvest fast money
David Russell | firstname.lastname@example.org
optionMONSTER's Heat Seeker monitoring program detected the purchase of about 1,700 weekly 195 calls for $2.08 and the sale of an equal number of weekly 200 calls for $0.75. Both expire on Friday, so they're betting on a quick rebound in the Illinois-based fertilizer company.
The trade cost $1.33 and will expand to $5 if the stock closes at or above $200 on expiration. (See our Education section for more on the strategy, known as a call spread because it leverages a move between two prices.)
CF is down 2.63 percent to $192.07 this afternoon. It touched an all-time high above $233 late last month but has been falling since. The stock is now back around a level that was resistance in the spring of 2012, which could be leading some traders to think that it will bounce.
Buying a vertical spread with short-term weekly options allows them to place that wager at low cost, creating the opportunity to translate a 5 percent gain into a profit of 279 percent. It also places much less capital at risk than buying the stock.
CF is scheduled to present at the Goldman Sachs Agribusiness Conference this afternoon, and the Bank of America Merrill Lynch Global Agriculture Conference tomorrow.
Total option volume is more than triple the daily average in the name so far today, according to the Heat Seeker.