This post was written by Minyanville contributor Steve Smith.There is smoke but no fire in the Potash(NYSE:POT) options activity today.
There has been recent rumors that fertilizer industry is due for some consolidation so companies such as Potash, Mosaic(NYSE:MOS)and Monsanto (NYSE:MON)can get some pricing power back. This has led to some takeover speculation that has helped the shares trend higher and caused an increase in the options' volume of late.
This morning there was a big option transaction in POT in which 11,000 of the April $90 calls traded in one slug. But don't let that lead you into thinking someone is making a big buy-out bet. The trade was executed at at the offer price of $2.70 a contract. Actually the price was a small "discount" to the theoretical fair value. This suggests the initiating party was selling the calls. Most likely it is an overwrite against long stock to take in some premium.
It still leaves someone with a bullish position, they have a potential upside of about $12.60 or 15% over the next month. But it doesn't appear anyone is betting the farm on a $95 plus takeover.
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Reader Comments (Page 1 of 1)
3-20-2009 @ 5:59PM
Henry Schwartz said...
I believe the POT option trade was the April 90-95 call spread bought 12,000x for 1.20 to open. POT at the time was trading near 80.79 but finished the day lower. Still makes for a bullish view in the name.