A potential surge in fertilizer sales sparked bullishness in at least one Mosaic (NYSE: MOS, Stock Forum) investor yesterday.
During the first hour of trading yesterday, one customer sold (to close) 4,500 MOS June 55 calls for $6.50 (with less than a month to go before expiration) and bought (to open) 9,000 Sept. 75 calls for $2.75. Current open interest on the June 55 calls was 18,500, while current open interest on the Sept. 75 calls was at a paltry 800. The investor collected $1.00 on this transaction, which will stay bullish in nature assuming he does not hedge by buying puts against the Sept. 75 calls.
The call activity we saw yesterday is the opposite of what I wrote about on Feb. 10 when a customer bought more than 3,000 far-out-of-the-money Sept. 30 puts with the stock trading at $45. MOS shares hovered around $42.00 from February to the beginning of this month, but they have jumped about $11.00 since May 11.
MOS shares are currently trading up $1.32 at $58.17, making the June 55 calls in-the-money and the September 75 calls about 29% out-of-the-money (but with more than three months until expiration). This stock is up more than 160% since hitting $22.31, a 52-week low, on Nov. 20. The fertilizer provider did not announce any significant news to instigate yesterday’s rally, but reports that analysts are bullish on MOS due to rising commodity prices and higher production expectations could continue to push shares higher.
Bullish call activity such this does not mean investors should run out and buy MOS shares. It is noteworthy that at least one customer is rolling up their long strike in return for more contracts on a bet that and MOS stock will close higher than $77.75 (the long call strike plus the premium received) by September expiration.