Merger Talk Sends CF Industries Holdings, Inc. (CF) to Record Heights

CF Industries Holdings, Inc. (NYSE:CF) hit an all-time best on news the company may be in advanced merger talks with OCI NV

by Karee Venema

Published on Jul 17, 2015 at 2:21 PM

After a relatively lackluster morning, CF Industries Holdings, Inc. (NYSE:CF) has taken flight this afternoon, and is now grouped with Axovant Sciences Ltd (NYSE:AXON) and Hertz Global Holdings Inc (NYSE:HTZ) as a leading advancer on the Big Board. Helping stoke the bullish flames is a price-target hike to $57 from $54 at BMO, and more importantly, reports the company is in advanced merger talks Netherlands-based OCI NV (subscription required).

In fact, the stock was temporarily halted earlier, and surged to a record high of $70.32 shortly after trading was resumed. At last check, the equity was up 6.4% at $66.75 --  bringing its year-to-date lead to 22.4% -- and sitting comfortably north of $66, an area that contained CF's advances earlier this month.

In spite of this technical tenacity, skepticism is seen all around the Street. In the options pits, CF's 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) put/call volume ratio of 1.64 ranks in the 81st annual percentile. In other words, puts have been bought to open over calls at a faster-than-usual clip.

Echoing this is the equity's Schaeffer's put/call open interest ratio (SOIR) of 1.27. Not only does this show that put open interest outweighs call open interest among options set to expire in three months or less, but it sits higher than 84% of all similar readings taken in the past year. Simply stated, speculative traders are more put-skewed than usual.

Outside of the options arena, short interest has been soaring on the stock -- jumping almost 400% in the most recent reporting period. The equity's ability to sustain its uptrend in the face of such intense selling pressure speaks volumes to its underlying strength.

Meanwhile, seven out of 12 analysts maintain a "hold" or "strong sell" recommendation on the stock, while the average 12-month price target of $65.01 stands at a discount to current trading levels. Going forward, an unwinding of the pessimism either in or out of the options pits could send CF Industries Holdings, Inc. (NYSE:CF) to new heights.

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