The Mosaic Co. (MOS)

Lot 2022-2

Update 8/2/2022: I exited my short bull put vertical spread on MOS, 26 days before expiration, for a $1.71 debit per contract/share, a loss before fees of $19 per contract. Shares were trading at $50.37, down $0.90 from the entry level.

The Implied Volatility Rank at exit was 64.3%, up 5.8 points from the entry level.

I exited on the day after entry because the position was unprofitable, trading for 49.4 of maximum potential loss. My practice for losing trades is to get out and move on. Analysts had expected earnings of $3.92 per share. They actually came in at $3.64 per share, a 7.1% miss.

Shares fell by 1.8% over one day for a -641% annual rate. The options position produced an 11.1% return for a -4056% annual rate.

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I have entered a short bull put vertical spread on MOS, using options that trade for the last time 47 days hence, on September 17. The premium is a $1.52 credit per contract share and the stock at the time of entry was priced at $51.27.

The Implied Volatility Ratio stood at 58.5%.

Premium:	$1.52	Expire OTM
MOS-bull put spread	Strike	Odds	Delta
Puts
Long	44.00	74.0%	26
Break-even	50.52	65.0%	31.5
Short	49.00	56.0%	37

The premium is 60.8% of the width of the position’s short/long spread. The profit zone covers a 1.5% move to the downside and an unlimited move to the upside.

The risk/reward ratio is 2.3:1, with maximum risk of $348 and maximum reward of $152 per contract.

How I chose the trade. The trade was placed to coincide with MOS’s earnings announcement, after the closing bell on the day of entry. The short strikes were set to coincide with the expected move of $2.98 either way, based on options pricing, which gives a price range of $49.68 to $55.64. The Zacks Investment Research earnings surprise predictor gave MOS a score of 7.09%, with a rank of 3 (neutral).

By Tim Bovee, Portland, Oregon, August 1, 2022

Disclaimer

Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.

No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decisions for his or her own account, and take responsibility for the consequences.

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Based on a work at www.timbovee.com.