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Earnings Analysis in Mosaic

The ags and ferts have seen a great run over the past two weeks, as the whole commodities complex caught a bid-- you can see the long ideas I put out, and most of them did quite well.

With the pullback on Monday, the sector will most likely wait on MOS to report after the close today -- so if the news is a confirmation of price, I would not be surprised of a continuation of the trend in the overall sector.

Let's take a quick look at how the MOS options board is setting up-- of course, if you want to learn how to do this indepth, you can learn at EarningsTrades.

MOS is not what you call a ripper of a stock during earnings events; in fact, it is fairly tame. The chart below shows what selling a straddle would have netted you over the past 4 events:

So the risk/reward has been on the vol seller's side.

Let's take a look at the 30 day implied volatility and how it relates to the past earnings events:

So the current IV is not high at all-- that's probably due more to the lack of realized volatility in the market during the slow holiday trading. But this doesn't necessarily make vol a sale-- the front month options are running an IV of 46%, which is a little better in terms of premium.

So the trade here? A straight straddle sale should work on the front month, and if you want to protect it you can buy a strangle out in Feb. IWO subs are in the Jan/Feb 80 calendar, but that is a result of a roll from a bull call spread, which we had on in December. In a vacuum, the 80 calendar should work, assuming you're bullish on the space-- but we're going to take 1/2 off by the close to take profits on our position.

by Steven Place

Steven Place is the founder and head trader at investingwithoptions.com/