Mosaic Calls Could Make for a Pretty Profit Picture

This crazy market has made trading difficult. Volatility has forced traders to exit profitable positions early in fear that profits would otherwise evaporate. Here is a trade idea involving Mosaic (NYSE:MOS) options that may profit in a short period of time.

The trade:  Buy the October 47.5 calls for $2.95 or less.

The strategy: The plan is simple: The trade profits when the stock rises, and the call premium increases as the option moves toward being “in the money” and beyond. The maximum profit is unlimited because MOS can continue to rise, and the maximum loss is $2.95 if MOS finishes below $47.50 at October expiration.

The idea here is speculative, but it’s based on a nice technical pattern that could be setting up. Mosaic shares have been in a solid downtrend for the last half of September. The last several trading days have produced bearish candles and Friday’s candle was the biggest and most solid bearish candle of them all. Some technical traders will refer to that as an “exhaustion candle,” meaning that it looks like the stock is setting up a reversal pattern.

On Tuesday, the stock looks like it wants to form a bottoming tail or hammer candle which can be construed as a reversal sign in a bearish pattern. Short-term targets will be around $50 and then again at around $54.

This is most likely a trade that won’t last several weeks. MOS could possibly hit the target areas within a couple of days. Traders should consider exiting the position if MOS trades below $44.80, which is Tuesday’s low.



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