Potash is fertile ground for calls

Option traders have doubled their money in upside positions as Potash Corporation of Saskatchewan has rebounded this week.

On June 12, Investitute’s market scanners showed that 5,000 Weekly $16.50 calls expiring today were purchased for $0.58 as part of a bullish roll with shares at $16.74. This was clearly a new position, as open interest in the strike was a mere 6 contracts before the trade occurred.

Those calls traded for $1.22 today, more than doubling in value. The stock rose less than 5.75 percent in the same time frame, illustrating how options can outperform their underlying shares.

Long calls lock in the price where investors can buy a stock, letting them position for a rally at limited cost with the potential for significant leverage. They carry less risk than owning shares because the most that can be lost is the price of the options no matter how far the stock might fall.

POT was up 1.49 percent to $17.70 today. The fertilizer company, which reports earnings after the close on July 27, has been climbing since Scotiabank upgraded the name to “sector outperform” on Monday with a price target of $20.


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