Why Are Options Bullish on This Falling Ag Stock?
Shares of Bunge have been falling for more than two weeks, but the big option trade yesterday was bullish.
The agriculture and food company finished yesterday at $59.22, down 0.94 percent. The stock has essentially fallen every day since breaking above $66 on March 23. Shares are back near the low end of the range for the last year and 20 percent off the 52-week high of $74.04 set in mid-January.
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Despite the bearish action in the stock , one option trader apparently still likes its upside potential. The average option volume in the name is just 2,000 contracts a day, but one trade bought 9,800 of the January 2012 90 calls for $2.70, according to OptionMonster's real-time systems. This trading was against open interest of just 204 contracts, so it was a new opening position.
The call buying is a long-term bet that Bunge's shares will be at a level it hasn't seen since August 2008. It is one way of using options to play an extended recovery without laying out all of the capital need to buy the stock itself.
Bunge's Peers & Competitors:
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Chris McKhann is an analyst and writer for OptionMonster.