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Morning option trade alert: Monsanto, Regal Entertainment call volume boosts out of the gate
Call action in Monstanto Co. (NYSE: MON) and Regal Entertainment Group (NYSE: RGC) lit up out of the gate thanks to investors who are seemingly bullish on these names.
At 9:40 a.m. EST, one block of 3,500 MON October 80 calls changed hands at the ask price of $2.95 per contract. It appears that an investor bought these calls betting on the stock to rally at least 16% throughout the next seven months. The investor will make money on this long call strategy if MON shares close higher than $82.95 at October options expiration.
The October 80 calls have already gained 23 cents during morning trading. Implied volatility of these calls is 27%, compared to a 30-day historical volatility of 25% (the buying action out of the gate has pushed up implied volatility).
MON shares are currently up 43 cents to $71.71 so far today, and seem to have shrugged off a negative note from Morgan Joseph that the company faces various problems that could set back stock performance. MON did not announce any news today, and the company is due to announce earnings figures on April 7 before the market opens. Analysts anticipate earnings of $1.78 per share.
An interesting RGC call spread crossed the tape around 9:38 a.m. EST, and the action looks bullish.
An investor bought the April 12.5-15 call spread 4,000 times for a net debit of $2.40 per spread. The investor traded the April 12.5 calls for $4.40 per contract and simultaneously sold the April 15 calls for $2 per contract. Investors could make a maximum profit of 10 cents per spread if RGC shares close higher than $15 at April options expiration, and will begin to turn profits if the stock climbs higher than the breakeven price of $14.90. Call spread buyers protect against a significant slide in the stock and cap any losses at $2.40 per spread, or the premium paid.
Implied volatility of the April 12.5 calls is 58%, and the April 15 calls have an implied volatility of 33%. This compares to a 30-day historical volatility of roughly 36%.
RGC did not announce any news today, and the company could release earnings figures sometime around April 29.
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