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Call Players Emerge as Agrium Approaches New Highs

Speculators are establishing new positions at AGU's July and August 92.50 calls

by 7/3/2012 11:36 AM
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Call traders have converged on Agrium Inc. (NYSE:AGU - 91.77) today, with the stock flirting with multi-month highs in the wake of drought-depleted corn supplies, which could translate into higher fertilizer prices. So far today, AGU has seen around 3,100 calls cross the tape -- about 10 times its average intraday call volume. On the flip side, fewer than 2,000 AGU puts have changed hands.

Digging deeper, it appears speculators are establishing new positions at the July 92.50 call, which has seen volume of more than 750 contracts on open interest of fewer than 450. Likewise, the August 92.50 call has seen more than 550 contracts change hands on open interest of just 50. Plus, the majority of the short-term calls have crossed at the ask price, suggesting they were bought. By purchasing the calls to open, the traders are expecting AGU to muscle atop the $92.50 level within the options' respective lifetime.

However, today's appetite for bullish bets stands in stark contrast to the growing trend seen on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), where AGU sports a 10-day put/call volume ratio of 2.87. In other words, options traders have bought to open almost three AGU puts for every call during the past two weeks. Plus, this ratio stands just one percentage point from a 52-week peak, suggesting speculators have been initiating bearish bets over bullish at a near annual-high clip.

In the same vein, the stock's Schaeffer's put/call open interest ratio (SOIR) of 1.06 registers in the 86th percentile of its annual range. Or, in simpler terms, short-term options players are more put-heavy than usual at the moment.

Nevertheless, AGU still has plenty of fans on Wall Street -- particularly among the brokerage bunch. Currently, the stock boasts 15 "strong buys" and two "buy" ratings, compared to four lukewarm "holds" and just one "sell" or worse recommendation. Plus, the equity got even more analyst love today, after National Bank Financial upgraded the stock to "sector perform" from "underperform," and lifted its price target to $97.50 from $71.

At last check, AGU has added 3.4% to linger in the $91.77 region. The security is just a chip-shot from its 52-week peak of $93.49, tagged in late July 2011.


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