Limited upside expected for Mosaic

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Mosaic is near its 52-week low, and one investor doesn't expect a quick rebound.

optionMONSTER's monitoring systems detected the sale of about 10,000 October 60 calls for $2.38 to $2.47. Roughly the same number of October 67.50 calls were bought at the same time for $0.61 to $0.64. Volume was below open interest in the higher strike, so there are two possible explanations for the trade.

One is that the trader is short calls against a long position in the shares--a common strategy known as a covered call . (See our Education section)

Now that the stock has fallen, the investor could be rolling the position down to the lower strike. That would earn incremental income of about $1.75 while cutting $7.50 of potential upside if shares rebound.

Alternatively, the positions in both options may have been opened. Then the trade was a credit spread designed to earn money from MOS remaining below $60, with the higher-strike call buying serving as a hedge in case the stock rallies.

MOS has fallen 4.86 percent to $57.19 so far today and has lost 20 percent in the last week. They're down today after higher input prices caused the fertilizer company to miss estimates in a preliminary earnings. Revenue was strong, but sellers are focusing on the margin pressure.

Overall option volume in the name is more than twice the average amount so far today.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

Copyright © 2010 OptionMonster® Holdings, Inc. All Rights Reserved.


This article appears in: Investing , Options

Referenced Stocks: MOS

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