Options Volume Explodes as M&A Buzz Circles Potash Corp, Agrium Inc.

Reports are circling of possible merger between Potash Corporation of Saskatchewan (USA) (NYSE:POT) and Agrium Inc. (USA) (NYSE:AGU)

Aug 30, 2016 at 12:31 PM
facebook X logo linkedin

After being halted earlier, Potash Corporation of Saskatchewan (USA) (NYSE:POT) and Agrium Inc. (USA) (NYSE:AGU) have both begun trading again on the New York Stock Exchange. According to Bloomberg, the fertilizer firms are reportedly in talks to merge, sending the two equities soaring -- even amid a more bearish tilt in the broader stock market. At last check, POT stock is up 9.4% at $17.57, and AGU stock is 5.8% higher at $94.68. The speculation has also sparked a rush of activity in the options pits, with POT and AGU options flying off the shelves.

POT, for instance, has roughly 27,000 calls on the tape at last check -- five times what's typically seen at this point in the day, and six times the number of puts traded. Options bulls are taking aim at the $18 level, with possible buy-to-open activity detected at POT's weekly 9/2 18-strike and September 18 calls. In other words, traders are betting on the stock to extend today's rally in the near term.

Today's accelerated call activity is just more of the same in Potash's options pits, though. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), POT's 50-day call/put volume ratio of 4.98 ranks just 8 percentage points from a 52-week peak. In other words, calls have been bought to open over puts at a near-annual-high clip in recent months.

AGU, meanwhile, has seen an influx of put buying over the past two weeks -- even though the equity's options pits are still relatively bare on an absolute basis. At the ISE, CBOE, and PHLX, the stock's 10-day put/call volume ratio of 5.62 rests higher than 83% of all comparable readings taken in the past year.

This afternoon, however, AGU calls are crossing the tape at 43 times the average intraday rate -- and with 7,894 contracts traded, call volume is at an annual high. A number of options traders are eyeing extended gains through week's end, with new positions being purchased at the equity's weekly 9/2 88-, 90- and 95-strike calls.

On the charts, Potash Corporation of Saskatchewan (USA) (NYSE:POT) has turned in a lackluster performance over the long term, down 30% year-over-year. More recently, the shares have spent most of 2016 churning in the $15-$15.50 region. Agrium Inc. (USA) (NYSE:AGU), on the other hand, has surged 18.4% since hitting a two-year low of $79.94 in mid-February. The stock has repeatedly run into trouble at the century mark, though, and topped out earlier at an intraday peak of $100.24.

Sign up now for Schaeffer's Market Recap to get all the day's big stock movers, must-know technical levels, and top economic stories straight to your inbox.

Unlock Weekend Profits with Chris Prybal's Favorite Strategy Up +487.5% in 2024

With the markets going left, right, and sideways, you need to have a plan now more than ever. 

Expert Trader Chris Prybal is no stranger to volatility, and has mastered finding big stock rallies while other traders aren't looking over the weekend. Rallies that produced gains like +207% on RTX calls, +236% on MARA calls, and +238% on NET calls.

A few simple moves on Sunday at 7pm could be the “Secret Sauce” your portfolio needs to not just stay afloat, but make unprecedented gains in this turbulent market.

Don’t sit on the sidelines, beat the market with Chris Prybal's strategy. Join him now!




Rainmaker Ads CGI