Options Update: Mosaic Sees Heavy Option Activity
Mos Def
Sorry for the later-than-normal observation ladies and gents, you know, the whole Fed/interest rate thing was occupying my time. That said, I did find a company that was worth taking a look at in today’s Options Update, Mosaic
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PowerRating). As with yesterday’s subject, Abercrombie & Fitch
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PowerRating), I haven’t found a great deal of news surrounding MOS – yet the stock is still more than 1% higher on the day.
Sector brother/sister, Potash
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According to today’s Intraday Volume Explosion List, the unusually heavy activity for MOS has been of the put persuasion. On a normal day, 3,857 total puts trade on MOS – this activity has more than doubled today. Of the 8,374 total contracts traded, 1,249 of those have crossed on the September 110 put (MOS UY). Let’s see if we can get a hint at the essence of today’s action on this contract.
I honestly wasn’t expecting to find any major blocks of contracts when I went looking through the activity, and I was right. None of the transactions on MOS UY thus far have fallen in the 4-digit range. With this as the case, I am looking at the price action on MOS UY to get some idea, and it is incrementally lower… could it be that MOS bulls are liquidating these options as the stock trades near (but not below) 110? Could it be that some bears were trying to cash in early in the day (when MOS was trading below 110)? I’m not sure, we can check MOS’s Schaeffer’s put/call open interest ratio (SOIR) tomorrow to see.
MOStly Optimistic
Analyst coverage on MOS is light, as only 5 brokerage houses track the stock. According to Zacks, MOS receives 3 “strong buys,” 1 “buy,” and 1 “sell.” This ratings configuration could lead to downgrades, but it also leaves room for fresh coverage to pop up. Of course, the stock’s performance will have quite a bit to do with brokerage decisions.
The optimism from analysts pales in comparison to that from option players. MOS’s SOIR of 0.55 is lower than 95% of those taken during the past 52 weeks. Again, this optimism could unwind at any moment, but it will depend on the stock’s performance. As for determining today’s activity by tomorrow’s SOIR – watch for the ratio to move more towards 1.00 if today’s put activity was the opening of new positions. The ratio will fall closer to 0.00 if the activity was liquidations.
MOStly Positive
You may look at MOS’s 4-week downtrend and think that I am crazy for classifying its technical performance as positive – but hear me out. Yes, the stock has lost 15.5% during the past month, but that does not change the fact that it has tacked on 182% during the past 52 weeks.
Yes, the stock faces overhead resistance from its 10- and 20-unit daily and weekly trendlines; but what about potential support? Looking at the intermediate term, MOS is positioned well above its 50-week and 80-week moving averages. This support would do little to help keep the stock atop the 110 level by September expiration (unless the 10-week trendline can quickly advance through the 100 region).
So, what are the chances that MOS can finish atop 110 by September expiration? Before the stock performed an about-face on me I was going to put the chances at “fair to middlin'” (thanks Cracker Barrel). I’m not one to be easily shaken from my convictions (even when I am wrong), so I will stick by my prediction that there is a better-than-average chance that MOS finishes September atop the 110 level. The main reason I feel this way is the 10-week moving average and the 10-month moving average. The weekly trendline will now be more important than I originally thought, as it could provide a floor to MOS’s current downtrend. If the stock can bounce and reclaim its 10-month moving average (in the upper-109 region), then the 110 level could fall by the wayside by September 19 – we will have to wait and see.
The Verdict?
Again, I believe that MOS has an opportunity to make it above 110 by September expiration, but it could be close. It could be one heck of a roller-coaster ride until then.
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