Schaeffer's Trading Floor Blog
In an alert to clients on Friday, J.P. Morgan said Potash Corp of Saskatchewan (POT) risks running short of supplies to fill contracts because of a strike at 3 of its mines. David Silver commented that the strike limits supplies at a time when world markets were "already exceptionally tight." POT has said the strike has affected industrial customers, accounting for about 5% of sales. Silver also wrote that "Absent a settlement, we believe Potash Corp may soon be forced to declare force majeure due to an inability to meet current contractual commitments."
The shares of POT are down nearly 5% this morning, but are holding above support at the 160 level – an area that marked lows for the shares in August. The stock is also holding above its rising 50-week moving average, which also supported the shares last month.
The security has seen an uptick in the amount of pessimism toward the shares. The International Securities Exchange reported that on Friday the stock saw 555 calls purchased to open compared to 962 puts, resulting in a put/call volume ratio of 1.73. The CBOE also reported 930 calls being bought compared to 989 puts, resulting in a put/call volume ratio of 1.06. The Schaeffer's put/call open interest ratio also rests at 0.95, which is higher than 82% of all those taken during the past 52 weeks. In other words, options players have been more skeptically aligned toward POT just 18% of the time during the past 52 weeks. Should the shares bounce back, an unwinding of this skepticism could help to propel the security higher.
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