Speculators Favor 60-Strike Calls on Potash Corp. of Saskatchewan
POT could be pressured by options-related resistance this expiration week
by Elizabeth Harrow (eharrow@sir-inc.com) 6/13/2011 12:00 PM
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Calls were the options of choice last Friday on Potash Corp. of Saskatchewan (POT - 55.41), according to data from the International Securities Exchange (ISE). During the course of the session, traders on the ISE bought to open 1,099 calls on POT, compared to just 146 puts. The security's single-day call/put volume ratio of 7.53 highlights a strong skew toward bullish bets over bearish.
In fact, during the past 10 sessions, speculators on the ISE, Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) have bought to open 3.05 calls for every put on POT. This ratio registers in the 81st annual percentile, implying that options players have scooped up calls over puts at a faster pace just 19% of the time during the past year.
This upbeat bias is also evidenced by POT's Schaeffer's put/call open interest ratio (SOIR) of 0.65, with calls comfortably outnumbering puts among options slated to expire within three months. This SOIR ranks lower than 92% of other such readings taken over the past year, implying that near-term speculators have been more call-heavy just 8% of the time.
POT's July 60 call experienced the biggest increase to open interest over the weekend, adding 1,894 new positions as a result of Friday's volume. This out-of-the-money strike is now home to 10,670 contracts in residence.
Front-month speculators also favor this round-number option, with POT's June 60 strike carrying peak call open interest of 16,157 contracts. With June-dated options set to expire at the end of this week, the unwinding of hedges related to these out-of-the-money calls could act as a headwind for the shares during the next several days.
However, out-of-the-money call buyers may have an ulterior motive. Following a months-long decline, short interest on POT has started to ramp back up, rising by 16.5% during the most recent reporting period. With buy-to-open call volume and short interest rising simultaneously, it's possible that traders are using bullishly oriented options to limit the upside risk on their bearish stock positions.
Speculators Favor 60-Strike Calls on Potash Corp. of Saskatchewan
