Monsanto Company (MON) Puts Prominent Amid WHO Debate

Monsanto Company (MON) traders are buying weekly puts

by Griffin Kruse

Published on Mar 23, 2015 at 2:23 PM
Updated on Apr 20, 2015 at 5:09 PM

Monsanto Company (NYSE:MON) is down about 2.7% to reach $112.62, following news that the World Health Organization (WHO) has classified glyphosate (the primary chemical found in the firm's Roundup herbicide) as "probably carcinogenic to humans." The firm has since countered, saying it "disagrees with junk science," and the "conclusion is not supported by scientific data." In any event, MON is now staring at a 5.7% year-to-date deficit, and options are exchanging hands at four times the average clip, with some traders betting on short-term downside for the security.

Puts have nearly doubled calls, at last check. Drilling down, today's most active contract is the weekly 3/27 112-strike put, where buy-to-open activity has been detected. By purchasing this put, speculators anticipate the security will fall beneath the strike by the close on Friday, when the contracts expire.

Many traders are likely cheering the recent downtrend, as sentiment in MON's options pits is nearing a bearish peak. Specifically, the stock's 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) put/call volume ratio of 9.51 ranks in the 98th percentile of its annual range. Simply stated, puts have only been bought to open at a higher frequency 2% of the time over the past 12 months. Echoing this bearish indicator is stock's Schaeffer's put/call open interest ratio (SOIR) of 1.18, which sits in the 83rd percentile of similar readings from the past year, pointing to a bigger-than-usual preference for short-term puts.

The brokerage bunch is overwhelmingly bullish on Monsanto Company (NYSE:MON), though, as over 75% of covering analysts rate the stock a "strong buy," with no "sell" or worse recommendations to be found. Additionally, the security's consensus 12-month price target of $134.05 sits at a 19% premium to current trading levels.

Daily Chart of MON Since March 2014

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