Monsanto Company (MON) Stock, Options Catch Fire on Fresh Buyout Bid

A higher offer from Bayer AG has Monsanto Company (MON) climbing the charts

Kirra Fedyszyn
Jul 14, 2016 at 3:05 PM
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Monsanto Company (NYSE:MON) is climbing the charts this afternoon, last seen 2.5% higher at $103.64, on news that Germany's Bayer AG has come back with a higher offer for the firm, after its $62 billion bid was rejected in late May. Today's cash offer comes in higher, valued at $125 per share -- a 20.6% premium over the stock's current value. It also comes with a $1.5 billion reverse-breakup fee, payable to Monsanto should the deal be shut down by antitrust regulators. The news has MON stock volume running in the 99th percentile of its annual range, and the equity's option pits are buzzing.

MON options are trading at three times their typical intraday pace, and calls are outnumbering puts nearly 3-to-1, with roughly 37,000 on the tape. Along with what appears to be a large three-way spread in the October series, traders have been circling calls in the July and August series, which account for six of the 10 most active options.

The stock's options pits have been unusually busy of late, with put and total options open interest seated at annual highs, as of yesterday's close. Call open interest is just behind, in the 99th annual percentile. Still, calls have long been the option of choice for MON traders, per the security's 50-day call/put volume ratio of 4.92 on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) -- higher than 82% of all comparable readings in the last year.

Elsewhere, optimism has been building as traders eye a buyout. Short interest on MON fell by 23.5% during the two most recent reporting periods, and now represents just over 1% of the stock's available float. Plus, more than half of the analysts following MON call it a "strong buy," without a "sell" rating in sight.

M&A chatter helped MON soar to an annual high of $114.26 in early June, but the shares then pulled back to the $100 level. Still, the stock is now up 5% year-to-date, and should Monsanto Company (NYSE:MON) accept today's buyout offer, a rally to $125 would put the stock at a level not seen since February 2015.

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