Tuesday, October 11, 2011

Mosaic (MOS) - Time Vol Diff on Rising Stock

MOS is trading $56.26, up 5.2% with IV30™ up 6.9% as of ~11:15am EST. The LIVEVOL® Pro Summary is below.


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The Mosaic Company (Mosaic), formerly GNS II (U.S.) Corp., is a producer and marketer of concentrated phosphate and potash crop nutrients for the global agriculture industry.

Best I can tell, the stock is up based on industry news – and more specifically the earnings report and outlook from MON. Here's a snippet from a Motley Fool article:

Monsanto kind of wowed Wall Street with its earnings report last Wednesday. Expected to report a $0.27 pro forma loss for its fiscal fourth quarter, the company instead reported a loss nearly 20% less severe ($0.22 per share). The company also allayed investor fears that its pricey, premium-quality crop seeds might be losing appeal with U.S. farmers in a tough economy. In fact, Monsanto reported sales of seed corn 58% higher than it had achieved in the year-ago quarter. Soybean seeds also sold strong, helping Monsanto book total sales gains of 39% in its seeds and genomics division.


if you agree with JPMorgan that 2012 is likely to be a good year for Monsanto selling seeds, logic would suggest it's also going to be pretty good for companies like Mosaic (NYSE: MOS ) and Potash (NYSE: POT ) , for example, which sell the fertilizer that helps such seeds to thrive.

Source: TheMotleyFool.com, written by Rick Smith.

While I’m entirely agnostic with respect to the fundamentals, what I do see is an interesting opportunity with the vol. Let’s start with the skew chart (below).

Two things are quite noticeable to me:
1. The Oct monthly options are priced at substantially higher vol than the Nov options.
2. The Oct upside is bid relative to the ATM, yielding an even greater vol difference.

Let’s look to the Charts Tab (6 months), below. The top portion is the stock price, the bottom is the vol (IV30™- red vs HV20 - blue vs HV180 - pink).

Another couple of things that stand out to me:
1. The stock price hit its 52 wk low ($44.86) on 10-4-2011 (a week ago).
2. The implied is trading right in between the short-term and long-term historical realized vol. In English, the implied is priced sort of “fair” ish to those two measures.

Finally, let’s turn to the Options Tab.

I wrote about this one for TheStreet.com (OptionsProfits), so no specific trade analysis here. I will say that while the upside skew diff is the largest, I'm usually not a fan of buying deltas on a rallying stock on news of another company -- just a phobia of mine. The downside does look interesting and adding the weeklies for some long coverage to some ratios also adds an interesting twist.

This is trade analysis, not a recommendation.

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