It took less than a day for Mosaic to yield big gains for bullish option positions.
Just yesterday, Investitute’s proprietary programs found that 3,600 August $20 calls were bought for $0.28 to $0.34 against open interest of 70 contracts as 1,500 August $20.50 calls were purchased for $0.08 to $0.18 against open interest of 181 contracts. Shares were trading for $19.99.
Today those August $20 calls traded up to $0.81 to represent an average profit of 160 percent, while the August $20.50 calls went for $0.40 in an average gain of more than 200 percent. The stock was up just 3.8 percent at the same time, illustrating how quickly options can far outpace 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.
MOS rose 2.03 percent to close at $20.57 today. The fertilizer company has fallen sharply since reporting earnings on Aug. 1 but is trying to bounce off a level last seen in 2008.