Monsanto Company (MON) Call Options Stay Hot Amid Buyout Talk

Rumors about a new buyout bid from Bayer AG have Monsanto Company (NYSE:MON) options volume soaring again

May 31, 2016 at 3:03 PM
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Monsanto Company (NYSE:MON) call options have been extremely popular this month, amid the agricultural company's ongoing M&A drama. Data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows 8.73 calls have been bought to open for every put during the past two weeks, a ratio that tops 94% of all others from the past year. Plus, MON's Schaeffer's put/call open interest ratio (SOIR) of 0.33 ranks in just the 3rd annual percentile, meaning short-term options traders are uncommonly call-skewed. 

The June 115 call added the most open interest during the last two weeks by far, and is now home to peak open interest for MON options. Data from the major options exchanges confirms substantial buy-to-open activity here, suggesting traders are hoping for MON to top $115 before front-month options expire at the close on Friday, June 17. 

Today, MON options traders are again targeting calls at an accelerated rate, with intraday volume more than doubling the intraday norm. Two of the most popular options are the weekly 6/3 and July 120 calls, which are likely seeing a mix of buying and selling activity. Elsewhere, other traders may be buying to open the July 110 call, seemingly betting on extended gains from MON over the next two months. 

Unfortunately for short-term speculators, they're paying hefty premiums for near-term MON options. The stock's 30-day at-the-money implied volatility has jumped to 40.2%, putting it in the 99th percentile of its annual range. Moreover, MON's Schaeffer's Volatility Index (SVI) of 39% is higher than 71% of all other readings from the past year. In short, the options market is pricing in elevated volatility expectations for MON. 

Shifting gears, Monsanto Company (NYSE:MON) stock volume is soaring today, with the shares up 2.4% at $112.17, amid new rumors that Bayer AG may raise its recently rejected buyout offer. In the meantime, MON will try to conquer the $112-$113 level, home to its most recent high and the site from which it sold off last June. Working in its favor, the stock is set to close above its 20-month moving average -- a level that served as support from 2011-2015 -- for the first time since the aforementioned sell-off. 

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