Potash – Buying at support for a 6 month options trade

Potash – Buying at support for a 6 month options trade


This Trade Was Updated December 23, 2011

Selling calls in the short month to turn this into a calendar spread

Prosperous inventories of grains, combined with a strong dollar have brought down some of the high beta Potash names. I don’t think I can kid anyone that I know that the Euro will go up from here, but I do think that there is cyclicality in the grains business, and there will be a time again when there is an under-supply, which will stimulate demand for Potash again. Potash (POT), from a TA perspective is trading at an important level. I have pasted the 2 year chart here. Back in Aug 2010, it gapped up from these levels, and we find ourselves back down/filling that gap now. This level was also successfully re-tested during the October selloff. I’m going long a few Call contracts in the June 45 contract at 2.35.

12/23 Update: Current price is $3.50 for the Jun calls I bought at $2.35. Its had a nice 3 day run, but I see momentum beginning to bearishly diverge from price, indicating a short term sell signal (see new chart i’ve posted). With that in mind, I considered closing this trade completely, but to maintain some long exposure, I sold the Jan 45 calls at .72 cents. So now this is a Calendar Call spread. Long Jun 45 Call / Short Jan 45 Call. Cost basis = $1.63.

Trade Details

  • The Ticker: POT
  • Target Price: TBD per share
  • The Trade
  • Buy to Open Jun 2012 45 Calls at 2.35 or better
  • Trade Opened: Dec 15, 2011
  • Trade Modified: Dec 23, 2011

Chart courtesy Finviz. Click to open larger.

Additional Image Provided by eatlovetrade:

This is not investment advice. Learning Markets, LLC is not responsible for errors or omissions. Please be sure to read our disclaimer.