Tuesday, May 17, 2011

Mosaic (MOS) - Calendar Spread

MOS is trading $67.75, up 0.2% with IV30™ unched. The LIVEVOL® Pro Summary is below.


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The Mosaic Company (Mosaic) is a producer and marketer of concentrated phosphate and potash crop nutrients for the global agriculture industry. I wrote about this one for TheStreet.com, so no specific trade analysis, but it's an interesting one to examine.

The stock just came up on a real-time custom scan. This one hunts for calendar spreads between the front two months.

Custom Scan Details
Stock Price >= $5
Sigma1 - Sigma2 >= 8
Average Option Volume >= 1,000
Industry != Bio-tech
Days After Earnings >=5 <=70
Sigma1, Sigma2 >= 1

The snapshot of the scan is included (below) in case you want to build it yourself in Livevol® Pro.

The goal with this scan is to identify back months that are cheaper than the front by at least 8 vol points. I'm also looking for a reasonable amount of liquidity in the options (thus the minimum average option volume), want to avoid bio-techs (and their crazy vol) and make sure I'm not selling elevated front month vol simply because earnings are approaching.

Let's look to the Skew Tab (below).

We can see how the front month is elevated to the back. Equally notable, since the parabolic shape in May is more pronounced than in Jun, the OTM options show a greater vol diff than the ATM.

Now we can turn to the Charts Tab (below). The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20 - blue vs HV180 - pink).

We can see the stock has dipped since early May. The news there was this:

The Mosaic Co., a fertilizer maker, said Wednesday that its stockholders other than Cargill Inc. approved an all-stock deal worth almost $20 billion to split from Cargill, a privately-held agribusiness conglomerate.

Under the deal, Cargill will distribute its 64 percent stake in Mosaic to Cargill stockholders and certain debt holders.

Mosaic expects the transactions to close by the end of May.

Cargill, one of the world's largest private companies, owns 286 million shares of Mosaic. The deal's $20 billion valuation is based on Wednesday's closing share price of $68.70.
Under the agreement, Cargill plans to exchange about 179 million of its Mosaic shares with Cargill shareholders for part of their Cargill stock. The remaining 107 million Mosaic shares will be traded for Cargill debt owned by third parties.
Source: AP

On the vol side, we can see that the short-term realized vol (HV20, in blue) has been very low relative to the long-term average (HV180, in pink). The IV30™ is right around the HV180, or in English, is substantially elevated to the short-term realized vol.

Finally, let's look to the Options Tab (below).

This is trade analysis, not a recommendation.

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1 comment:

  1. the deal is happening on friday - within the may expiration

    hence - the skew